Monday, December 5, 2011

Stocks above their 20 Day Moving Average

As a general rule, when readings are above 80%, stocks in the equities market are seen as overbought. Usually readings above 80% can remain above 80% for several days or even several weeks depending on the trend of the market. This indicator is simply read as the percentage of stocks above their 20 day moving average.Levels above 80 indicate that the public is showing high levels of interest in the market, and participating in the purchasing of stocks. When the stock market is in a downtrend, the 80% level will have very little staying power, which is why you should take heed to this reading. I would expect any further advance in the market to allow this indicator to reach overbought territory to then consider aggressively shorting the market.

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