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Tickers in this Article: NTAP, ABFS, CELL
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 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 a trader is able to set up.

The basic signal, known as a crossover, is a favorite among many traders because it removes all emotion. A sell sign is triggered when a short-term moving average crosses below a longer-term average. A common crossover that is used to predict the beginning of a short-term downtrend occurs when a 15-day moving average crosses below the 50-day moving average. Let's take a look at a few companies that have recently experienced a bearish moving average crossover.

NetApp Inc. (Nasdaq:NTAP) - Taking a look at the daily chart of NTAP, you'll notice that a cross between the 15-day moving average and the 50-day moving average has correctly predicted the direction of the short-term trend twice since October. Notice how the recent bounce off a nearby trendline has caused the shorter-term moving average to cross below the longer-term average again. This crossover is significant because it will cause many technical traders to keep a bearish outlook on this stock until the price is able to break above the trendline. In addition, most short-term traders will want to wait for the 15-day moving average to cross back above the 50-day average before betting on a move higher.


Arkansas Best Corp. (Nasdaq:ABFS) - ABFS is another company that has recently experienced a bearish moving average crossover. As you can see from the chart below, the bounce off the long-term level of resistance near $42.15 has caused the 15-day moving average to fall below the 50-day moving average, which will cause the bears to step in. Many short-term traders will use the recent weakness to predict a move lower, so bullish traders may want to consider waiting on the sidelines until the price is able to break above the long-term resistance that is shown by the horizontal trendline.


Brightpoint Inc. (Nasdaq:CELL) - The chart of CELL is similar to that of ABFS because it is trading below a long-term level of resistance. The recent bounce off the resistance has caused the 15-day moving average to cross below the long-term moving average, which is making this stock a candidate for having its price pushed lower. As you can see from the chart below, the stock has been able to find support near a short-term trendline; bearish traders may want to wait until the price falls below this trendline before they consider entering a position. Bullish traders will want to wait until the price moves above $10.25 (horizontal trendline) because until then, the stock runs the risk of being sent substantially lower.



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

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