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Tickers in this Article: DIS, OII, CRME, MPW, DLTR
Technical analysis has been around for decades and through the years, traders have seen the invention of hundreds of indicators. While some indicators are more popular than others, few have proved to be as objective, reliable and useful as the moving average.

Moving averages come in various forms, but their underlying purpose remains the same: to help technical traders track the trends of financial assets by smoothing out the day-to-day price fluctuations, or noise. By identifying a changing trend, moving averages allow traders to make sure that the new trend works in their favor and it can often increase the number of winning trades.

The basic signal, known as a crossover, is a favorite amongst many traders because it removes all emotion. A buy sign is triggered when a short-term moving average crosses above a longer-term average. As you will see below, the most popular signal used to predict the beginning of a long-term uptrend occurs when a 50-day moving average crosses above the 200-day moving average. Let's take a look at a few companies that have recently experienced a bullish moving average crossover:

Walt Disney Co. (NYSE:DIS) - Looking at the chart of DIS, you'll notice that the 50-day moving average (black line) recently moved above the 200-day moving average (pink line). This crossover suggests that the bulls are in control of the direction and that this could be the start of a new long-term uptrend. As you can see from the chart below, the stock faced strong resistance near the 200-day moving average in the past, but the recent breakout suggests that this story has changed and that the next move may be higher. Many bullish traders may want to wait until the price is able to move above the nearby swing high before entering a position or some may even want to set a stop loss below the nearby averages because it offers an interesting risk/reward ratio.


Oceaneering International Inc. (NYSE:OII) - OII is another company that has recently had its 50-day moving average cross above its 200-day moving average. As you can see from the chart below, the stock was able to find support near the $70 level, which suggests that the downside may be limited in the event that the bears step in and try to push the price lower. The recent break above the swing high will be used to confirm the long-term shift in trend and it will likely be used by short-term traders to signal a move higher.


Cradiome Pharma Corp. (Nasdaq:CRME) - Taking a look at the daily chart of CRME, you'll notice that the 50-day moving average recently crossed above its 200-day moving average, which suggests that the stock is setting up to make a move higher. Many short-term traders will wait for the price to move above the nearby swing high ($10.12) to ensure that the momentum has indeed shifted. We've also added the MACD indicator, which recently crossed above its signal line (dotted line). This bullish crossover will likely be used to confirm the long-term moving average crossover and suggests that the price action may move higher. Another small-cap company that is worth mentioning is Medical Properties Trust Inc. (NYSE:MPW) because the chart looks very similar to CRME. This stock has also had its 50-day moving average cross above the 200-day moving average. Traders will wait for the price to move above the nearby resistance of $12.89 to confirm the move higher.


Dollar Tree Inc. (Nasdaq:DLTR) - DLTR has been on an impressive run over the past few months and the recent moving average crossover suggests that the uptrend could continue. As you can see from the chart below, the price easily broke above the resistance of its 200-day moving average in early May. It wouldn't be surprising to see bullish traders protect their positions by placing a stop-loss order below the nearby swing low of $33.31. The close proximity of the swing low to its long-term moving averages makes this an ideal level to place a stop-loss. A sustained move above these support levels will translate into a long-term uptrend.


For more on moving averages see:
Basics Of Moving Averages
Moving Average Explosions
Moving Averages Tutorial

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