Simplifed Moving Average Chartology

Screening Health Care ETFs I came across this chart for XLV.  I thought I would share what Moving Averages (MA) can be used for as this one shows a great 50 support line.  Keep in mind this is a simple use of the MA.  The 200-day is used to show if the current price is holding well above its 200 day average price, which would show strength in the equity.  The 50-day is used to show how short-term price action is sustaining.  With this chart you can clearly see that each time XLV touched its 50-day it either bounced or shortly broke and quickly recovered back above.  This line shows a good support line and technically it is holding at the 50-day line.  So what does this mean to us?   Not that I am recommending XLV for anything except a simple example of technical chart analysis. As a trader you see the equity has pulled back to the 50-day, so it may be an opportunity to trade the bounce.  Setting a entry point limit order below the 50-day and a trailing stop could be an easy trade set-up.  Additionally, if you are an options trader you could use the chart to help determine entry point for buying calls, selling puts etc...  Also, if the premiums are good, this also can assist you in your covered call strategies as well.

Happy Trading...