Silver’s Key Moving Average Crossover | RJO FuturesPosted 04/13/2017 9:26AM CT |
A moving average is the average value of a market’s price over a defined time period, and can mark important support and resistance levels in the market. The basic concept is to be long when the market is trading above the moving average, and short when below. The most common moving averages are the 50-, 100- and 200-day, although traders use other numbers. You can use whatever you are comfortable with to gain a unique edge.
The moving average crossover is a trend identification tool that compares different moving averages. It provides a trading signal when momentum shifts directions. When a shorter moving average crosses a longer one, the trend is seen as up. When a shorter moving average crosses below a longer one, the trend is seen as down.
Moving averages do give a delayed signal, because they are computed using historical data. Using end-of-day data is more useful for some traders, because there can be an intraday crossover that could give a less reliable signal.
In the May Silver chart, we did see the Blue 50-day moving average cross the Red 100-day recently as the market began to rally, and it seems as if the Green 200-day moving average would show that silver is starting a bull trend. If the market trades above the 200-day for a few sessions, that reinforces a bullish shift we were seeing with our other indicators.
May ’17 Silver Daily Chart