Moving average prices are widely used in trading. When a short-term average is above a long-term one, the stock is generally moving higher. The opposite is true when the shorter-term average is below the lower one. It usually means the stock is heading lower.
When moving averages cross each other, some traders use it as a signal to buy or sell. Below is a look at the charts of Wells Fargo WFC and Bank of America BAC
On the following chart, the blue line is the 10-day simple moving average. The red line is the 50-day simple moving average.
When the blue line moved above the red line in November, it was a good time to buy. When it crossed below it in June it was a good time to sell.
Now the blue line has crossed back above the red line. It could be time to buy.
The same moving averages have given accurate buy and sell signals for Bank of America's stock. It looks like they may be about to give another buy signal.
Photo: Taylor Simpson on Unsplash
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