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Which Moving Average Is the Best Support?


Fifty-day? 200-day? Here, an attempt to solve the problem of which moving average provides the best support for stocks.

Below is a table of the results, where you'll see the average, median and percent positive of the returns. The last two columns show the percentage of the time the stock bounced off the moving average to gain at least 5% within a month of the signal. The second column is when the stock fell right through the moving average and lost at least 5% within a month.

The 50-day moving average has, in fact, been pretty positive for stocks. That trendline shows the best average return, along with the highest percentage of stocks bouncing for a big gain and the lowest percentage of stocks that fell through the moving average. Meanwhile, based on the data below, the 150-day moving average doesn't seem like very solid support.

Which moving average has been the most reliable support this year? The table below summarizes the data for 2012 only. The 50-day still looks to have been pretty good support, with stocks averaging a 0.77% return over the next month after pulling back to the moving average. The 200-day moving average also looks like it has been reliable.

No positions in stocks mentioned.
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