You’ll have to draw a line in the sand sooner or later. Where is that line? On a daily chart, the 200 Day Moving Average is that LINE. This is on the overall market though, not just on a particular stock. A good pulse of the market is the S&P 500 Index. Keep it in mind that even the S&P 500 is weighted in favor of larger capitalized companies. So if the larger of the companies listed on the S&P 500 is moving higher but the rest of the 500 is not, the whole Index will move up. It still gives you an overall feeling of where the market is going.
Warning!! If the S&P 500 is underneath the 200 Day MA, then you’ll have to believe that your in a down trend. Trends tend to last for months or even years, which gives you the opportunity to buy on pull backs or short on rallies. You’ll want to adjust your time frame for your entrances accordingly. A couple of indicators should help you with your entrances and exits in an upcoming blog. You’ll also want you use support and resistance lines.
