![]() The chart below shows how it works.Īs you can see it takes quite a long time for the signals to change, so these crossovers are not what you'd call ideal for timing entry and exit actions, but they do provide useful information about the long-term trend. As with any indicator, it isn't foolproof, but I think it is an excellent way to define the trend quickly and objectively. If the 50EMA is above the 200EMA, the long-term trend is up (bullish), and the long-term trend is down (bearish) if the 50EMA is below the 200EMA. On a daily chart we allow the relationship of the 50EMA and the 200EMA to define the long-term trend. Erin and I use the slightly more sophisticated method letting moving average crossovers define the trend. The simplest interpretation would be to identify the trend based upon the direction of the moving average-rising, falling, or flat. For a more objective method, moving averages can be used in different ways to determine the trend of a price index. QUESTION: In the StockCharts DecisionPoint documentation, it says that the weekly (17EMA and 43EMA) and monthly charts (6EMA and 10EMA) can be used to show long-term trends, but in the webinar, Erin said that they use only the daily chart.ĬARL'S ANSWER: While the best way to determine the trend is to put some eyeballs onto the chart, that is still a subjective judgement and can sometimes be open to interpretation. ![]()
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