Expert Charts, Trading Tips and Technical Analysis from INO. March 4, by Jeremy Lutz. Today we welcome Michele Schneider to the Trader's Blog.

Michele is going to share with you how she uses the day moving average to trade. She provides in-depth trader training as the market analyst, writer and host of Mish's Market Minute, contributes to several online trading publications a series of trading strategy articles called Taking Stock, and serves as a regular contributor to MarketGauge's free newsletter Market Outlook.

Volume Shockers (stocks with rising volumes), Technical Analysis Scanner

The day moving average may be the granddaddy of moving averages. Simply put, a financial instrument that is trading above it is healthy; below it, anemic.

The day moving average measures the sentiment of the market on a longer term basis. This is where major players like pension plans and hedge funds need to look in order to move a large amount of stocks. I display it on all my workspaces proudly, formatted in emerald green and real thick so I can't help but notice. Not only am I always interested in a stock, ETF or future's price movement in relation to the day moving average - I also study the slope, the distance it is from price action, and its correlation to some other moving averages, particularly the 10 and 50 day.

For instance, where the 50 in particular is in relation to the day moving average determines the phase of the overall market, ETF, or financial instrument. Please refer to this article on trading phase changes. We also have a swing trading course which covers ETFs and the 6 Phase Changes in depth and a tool called the ETF Monitor that tracks the phases learn more about these here. Longer moving averages like the lag.

They tend not to predict price direction, but rather reflect current direction. Therefore, when you hear "the trend is your friend," technically put it really means that the price over the last days is indicating an upward trend, therefore look for buy opportunities; versus the price is below the last days, therefore look for sell opportunities.

Moving averages are also good indicators for support and resistance. Since so many traders and investors watch the day, once a price point reaches, fails or holds it, the collective psychology creates an immediate impact.

Over the longer term, even psychology won't sustain the price action as the collective group is fickle.

Moving Averages - Simple and Exponential [ChartSchool]

But, for a short term play, it works out amazingly well. Furthermore, if the price of an instrument is far above or below the day moving average, the reverse happens: The price is above the day moving average - trend is up.

The price is well above the day moving average and the slope of the line is down. That tells me not to chase it at current levels. The 50 crossed over the day moving average-trend can now change back to bullish from accumulation, but with a downward slope, patience is called for.

One can either wait for the price to get closer to the day moving average, which should now act as support or, wait for the slope to turn up along with another signal like consolidation around a daily support level or a test and hold of the adaptive moving average.

Ideal scenario is that FXI finds support at the The price is below the day moving average - trend is down. The price is considerably lower than the day moving average at time of writing, but on September 21st it rallied up to the day, thereby acting as a perfect resistance point - with a low risk short opportunity.

10 Dividend Stocks Crossing Above Their DMA - Slide 1 of 10

Slope of the day moving average is down and has been for quite some time, but now it is turning more neutral. Plus, the other shorter term moving averages 10, 30, 50 are all beneath the Furthermore, although the 10 crossed over the 50 day the week of September 13th, the slope of the 10 is down - so a weak indication. Now, the slope neutralizes on the could mean that the bear trend is coming to an end.

For signs that GS momentum to the downside is waning: For signs that the weakness will continue with the possibility of the price heading back to the lows look for: When one considers the trend, slope and relationship the day moving average has to price and shorter term moving averages - whether you are a day, mini or swing trader - employ it as a compass for your trading.

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