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Figure 12.21
Moving Averages Chart
Copyright 2000, TradeCast® Ltd. |
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In an uptrend, the 20-day line should remain above the 40-day line. If the line crosses below the 40-day line, that proves that the trend is decelerating or reversing. That is a sell signal. |
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In a downtrend, the 20-day line should remain below the 40-day line. If the line crosses above the 40-day line, that proves that the trend is decelerating or reversing. That is a buy signal. Can you see the buy signal in the next chart? |
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What are the volume numbers telling us? Be careful that you don't jump to conclusions here because the answer to that question is not so intuitive. We never look at volume by itself; we look at it with associated price movement. The four associations are: |
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1. Above-average volume without strong price movement actually signals that the current move is coming to an end. Why? Because |
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