When researching a stock, investors can use both Fundamental Analysis and Technical Analysis to help determine whether that stock is a good buy -- or a good sell.
Many investors are the most familiar with Fundamental Analysis -- what's happening in the underlying business, its earnings, revenues, balance sheet, and how the management is doing running things.
But then there's Technical Analysis, which looks only at the trading data for the stock -- the real life supply and demand for the stock over time -- and examining that data in different ways.
One of these ways is to calculate an average of the closing prices for the last 200 trading sessions. Doing this calculation for each day going backwards in time shows how that 200-day average has moved -- hence the term "200-Day Moving Average."
The reason why the 200-Day Moving Average in particular is so popular in Technical Analysis is because historically it has been used with profitable results to time the market. One popular timing strategy is to be invested in the S&P 500 ETF (AMEX:SPY) when it is above its 200-Day Moving Average, and move to cash when it goes below it.
With individual stocks, investors can benefit from being alerted when a stock rises above, or falls below, its 200-Day Moving Average, and then use Fundamental Analysis to help determine whether the technical signal is a buying opportunity, or a "look out below" warning.
Many investors are the most familiar with Fundamental Analysis -- what's happening in the underlying business, its earnings, revenues, balance sheet, and how the management is doing running things.
But then there's Technical Analysis, which looks only at the trading data for the stock -- the real life supply and demand for the stock over time -- and examining that data in different ways.
One of these ways is to calculate an average of the closing prices for the last 200 trading sessions. Doing this calculation for each day going backwards in time shows how that 200-day average has moved -- hence the term "200-Day Moving Average."
The reason why the 200-Day Moving Average in particular is so popular in Technical Analysis is because historically it has been used with profitable results to time the market. One popular timing strategy is to be invested in the S&P 500 ETF (AMEX:SPY) when it is above its 200-Day Moving Average, and move to cash when it goes below it.
With individual stocks, investors can benefit from being alerted when a stock rises above, or falls below, its 200-Day Moving Average, and then use Fundamental Analysis to help determine whether the technical signal is a buying opportunity, or a "look out below" warning.
