Most of the time, a user will have more than one period of moving averages in their charts… usually 50 and 200. Obviously based on your time frame, depends on how high or low you set your moving average periods.

While we already know about using moving averages as instances of support and resistance, there are other technical indicators that multiple moving averages can give off. The best is example is when moving averages crossover each other.

There are basically 2 meanings behind this:

1. Its bullish when lower moving averages crossover higher moving averages. Example: 50 SMA crossing over 200 SMA.

2. Its bearish when higher moving averages crossover lower moving averages. Example: 200 SMA crossing over 50 SMA.

As you can see, this is pretty much common sense. Obviously, if the 50 SMA is crossing the 200 SMA, then that means the average over the last 50 days is faster than the prior 200; thus, a bullish sentiment is released.

As you can see in the chart above, once the 50 SMA crossed over the 200 SMA, the stock really took off and increased in price.

It is important to note that moving average crossovers are used to purely determine trend, and not part of determining respective price targets.

An example, would be Reuters/Jefferies CRB Index (NYBOT_CR). This index is a great indicator of inflation and deflation, and has been around for a little over 50 years. It covers about 19 markets. Some include: basic metals, aluminum, crude oil, gas, cattle, and so on, so it really gets a good grasps of what going on.

The following video covers how to examine this market and accurately use this index to profit off certain market movements.

View video – The Reuters/Jefferies CRB Index – Number One Predictor of Inflation and Deflation

There is mathematical equation, but most people will utilize RSI within the tools of a chart. The only customized option for RSI is the period length you want to examine. Obviously long-term traders will prefer extended periods such as 30, while many swing traders will find 14 more significant. It is up to the trader to play around and determining which is best for them.

If you are familiar with stochastic, then understanding RSI won’t be too difficult. The main difference is the cycle number of 30 to 70.

Relative Strength Index Uses

Overbought/Oversold

In general RSI ranges between 30 and 70. Below 30 classifies oversold and above 70 distinguishes overbought. Many traders look at RSI falling below 70 as a bearish signal and breaking above 30 as a bullish indicator.

Centerline

The middle of the range stands at 50, and can also be used as various confirmations of different price movements. Consider RSI coming from 70 and bouncing off 50 to head higher. That is looked at as a bullish indicator. Obviously, the opposite of coming from 30 and bouncing down off 50 is looked at as bearish. Traders also look at a crossover of the line as final confirmation that the stock’s current momentum is ready to change.

Example

As you can see from the chart above, RSI does a good job of predicting change in momentum. Within this example, the 50 line acted as a pretty substantial barrier. Until Intel was able to move past it, the stock could never really head higher.

Where the stock stands now, if the RSI was to head below 50, then that would be a bearish indicator.

We can see this clearly in the following examples:

In the chart below, Netflix steadily rose higher. We can clearly see the breakout spots and the unusual volume size on all of them.

In this next chart, we see that the stock was looking to move into a new trading zone; however, if you paid attention to the volume of the break above the resistance (blue line), then you would have been a little skeptical of the move. As you can see, the stock did not breakout and actually headed lower.

The key is to take notice of what the average volume is, and then determine what is considered lower and higher than normal volume.

By using multiple indicators while analyzing one stock, a more accurate determination of future price movement can be created.

The video below shows you how to properly use:

• Candlestick
• Parabolic SAR
• Moving Average Convergence/Divergence
• Fibonacci Retracement

Watch the video – Black Monday anniversary