![]() A very conservative investor might wait for the share price to drop all the way to the 200-day moving average (in this case, $228) and make sure it holds before dipping in. That's because you should prepare yourself mentally for the real possibility that the share price could test or retest its moving averages. It's important for investors to become familiar with the SMAs for their investments especially if you are still accumulating shares. The 100-day moving average is up next at $249. For the QQQ, the ETF has already blown through the 10-day moving average and the sell-off today took it straight to the 50-day moving average at $269. Let's take a look at the QQQ's 200-day moving average as an example (NOTE: Just go to the Seeking Alpha Charting tool, click on "Momentum" and The "Moving Averages").Īs can be seen from the graphic above, Seeking Alpha's tool automatically pulls up 4 different SMAs (10-day, 50-day, 100-day, and 200-day). Given the market's sharp rally in tech off the March lows, all of the ETFs and stocks mentioned above are considerably above their 200-day SMA. The 200-day SMA seems, at times, to serve as an uncanny support level when price is above the moving average or a resistance level when price is below it. The indicator appears as a line on a chart and meanders higher and lower along with the longer-term price moves in the stock, commodity, or whatever instrument that is being charted. The 200-day SMA, which covers roughly 40 weeks of trading, is commonly used in stock trading to determine the general market trend. Here is the definition from Investopedia: That is especially the case for stocks/funds/ETFs they currently own or are "easing into" in an effort to establish a fully allocated position. This is a good time for investors who haven't spent much time looking at the 200-day moving average to become familiar with it. Over the past few days, we have seen a sharp market correction, but who knows how deep and how long it will last? The 200-day Simple Moving Average ("SMA") That being the case, I cautioned investors not to try to time the market and to adopt an "ease-in" approach - nibbling on shares on a weekly or monthly basis in order to save capital should the market suffer the sharp correction everyone's been waiting for. At the same time, it's been clear over the past few weeks that valuation levels had reached extreme levels. In each case I found the ETF or company very attractive from a long-term perspective because they will benefit from the strong multi-year tailwinds provided by 5G, the Cloud, the internet-of-things ("IoT"), AI, and the global pandemic and/or the work/school from home movement. These include articles on the Invesco Nasdaq-100 QQQ Trust ETF ( QQQ), the iShares Expanded Tech-Software ETF ( IGV), and individual companies like Amazon ( AMZN), Broadcom ( AVGO) and Alphabet( GOOG) ( GOOGL). I've been writing a lot of Seeking Alpha articles lately on tech-related investments for the 21st Century. ![]()
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