Moving averages (MAs) identify support and resistance levels generated by price action over pre-defined cycle lengths, turning higher and lower in response to broad trends. Long-term averages turn more slowly than short-term averages, with slopes identifying technical conditions that raise or lower the odds for price penetration. 澳洲幸运5官方开奖结果体彩网:Exponential moving averages (EMAs) change slopes more quickly than 澳洲幸运5官方开奖结果体彩网:simple moving averages (SMAs) due t𒉰o their faster construction.

Price pulling back to test a rising average from above is more likely to hold support than when testing a falling average. Price bouncing into a falling average from below is more likely to roll over than when testing a rising average. Multiple moving averages at 澳洲幸运5官方开奖结果体彩网:different cycle lengths complicate these scenarios because some may be rising while others are fall🌄ing.

Slope Relativity

Long-term averages change slope less frequently than short-term averages. For example, a 20-day MA can oscillate between rising and falling slopes dozens of times over a three-month period, while a 澳洲幸运5官方开奖结果体彩网:50-day MA may shift two or three tiﷺmes. Meanwhile, a 200-day MA may not change at all or shift higher or lower just a single time.

This slope relativity comes into play in 澳洲幸运5官方开奖结果体彩网:chart analysis in two ways. First, a🐠 long-term average always exerts greater support or resistance than a short-term average. For example, support or resistance at a 200-day MA is harder to break tha꧅n support or resistance at a 50-day MA. Second, rising and falling slopes add to or subtract from support or resistance, depending on the price's location relative to the averages. 

In this hierarchy, a rising long-term average exerts greater support than a flat or falling average when the price is trading above the level while also generating increased support than a short-term rising or falling aﷺverage. Conversely, a falling long-term average exerts greater resistance than a rising or flat average when the price is trading below that level while also generating greater resistance than a short-term rising or falling average.

Dow component The Coca-Cola Company (KO) bounces twice on top of the 200-day EMA during a 2017 uptrend and breaks support in early 2018, entering a major 澳洲幸运5官方开奖结果体彩网:downtrend. Four bounces in the next three months reverse at the moving average, which rolls into a descending orientation. The 50-day EMA rolls over more quickly, generating five reversals during the same period. It crosses the 200-day EMA in March, printing a bearish 澳洲幸运5官方开奖结果体彩网:death cross.

Adjusting Strategies to Slopes

Price above rising long- and short-term averages generate a 澳洲幸运5官方开奖结果体彩网:bullish convergence that favors long-side strategies, with bigger positions and longer holding periods. This technical alignment is common in uptrends and 澳洲幸运5官方开奖结果体彩网:bull markets. Price below rising long- and short-term averages generate a bullish divergence that favors 澳洲幸运5官方开奖结果体彩网:dip-buying opportunities and value plays. Price trading above averages with opposing slopes signals conflict, with a rising long-term average supporting long-side plays w🌌hile a falling slope points to a🧜 higher-risk environment.

Price below falling long- and short-term averages generates a bearish convergence that adds power to 澳洲幸运5官方开奖结果体彩网:short sale strategies, encouraging bigger positions and longer holding periods. This technical alignment is common in downtrends and 澳洲幸运5官方开奖结果体彩网:bear markets. Price above falling long- and short-term averages generates a bearish 澳洲幸运5官方开奖结果体彩网:divergence that favors profit taking and short selling. Price trading below averages with opposing slopes signals conflict, with a falling long-term average supporting short side plays🅷 while a rising slope warns of an impending bottom.

These scenarios cover just a small portion of the complex interrelationships between price, moving averages and slope. Conflicts should be welcomed because interweaving price structures create powerful engines for 澳洲幸运5官方开奖结果体彩网𝔍:short- an🎐d long-term trading opportunities. However, watch out when moving averages ease into horizontal orientation and converge, and the price starts to oscillate across those narrow levels. This mixed action points to high noise l🐽evels that can signal long periods of🐷 weak opportunity:cost. 

Moving averages ease into horizontal trajectories in sideways markets, lowering their value in trade and investment decision making. Dow component McDonald's Corporation (MCD) sells off at the start of 2018 and spends the next four months grinding sideways in a choppy pattern. It crisscrosses the 200-day EMA more than 30 times during this period, issuing multiple waves of 澳洲幸运5官方开奖结果体彩网:false signals. The 50-day EMA goes horizontal a♔s well while price crosses its boundaries more than a dozen times🦹.

The Bottom Line

Get aggressive on the long side when the price is above rising long and short-term moving averages. Get aggressive on the short side when the price is below falling short and long-term moving averages. Get defensive when slopes don't match, or when the price is trading below rising averages or above falling averages.