Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Many use the moving averages as a trend line to indicate a dip. 50 day and 200 day are most common, but shorter term ones can be used.

Of course when stock price falls below the moving average that is a sell sign for many, and you don't know how low it will go. But when a stock repeatedly tests certain lows you can define a support level. Then it becomes safer to buy when the share price falls to near the support level.

Take a look at a Caterpillar chart for the last year. Its a cyclical stock, industry leader, currently hurt by decreased demand in Europe and Asia. It awaits recovery of the construction business (and now mining) and is a likely winner in any water projects or storm surge projects.

The dips are obvious and the support level is about 82. So when price surges below 83 or so, its time to accumulate.

If a stock is up two days and down one, to me that is a good performing stock. Few go up every day. But shorter term traders know to wait for the down day to get a head start on the stock.
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.