Just a run down on moving averages on a possibly cyclical stock that I happen to like )O: Cyclical is cyclical though. And there is a truth to a cyclic stock. They cycle in and out )o: The stock can be the greatest thing since sliced bread. CMI is a wonderful company and I own it long term in my IRA, so I do not mean to single it out. I own this long term and bought it at almost half the price it was on Friday. Could form a triple bottom and could beat earnings Tuesday morning (odds are they will but market response is key) and change this whole scenario. Fact is the moving averages look really bad and is why I chose this one for this post as I was looking for a chart with ugly moving averages.
Cummins Inc. designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components worldwide. It operates through five segments: Engine, Distribution, Components, Power Systems, and New Power. The company offers diesel and natural gas powered engines under the Cummins and other customer brands for the heavy and medium-duty truck, bus, recreational vehicle, light-duty automotive, construction, mining, marine, rail, oil and gas, defense, and agricultural markets; and offers new parts and services, as well as remanufactured parts and engines.
From this short description, it is involved in a several industries or sectors and is why I bought it a while back. Yearly low is 192.72. Yearly high is 277.09. Price closed today at 232.10. I just am not sure CMI feels comfy at the higher prices it was at. Maybe it does not live there. Price usually returns home eventually.
But to examine moving averages, and these are simple moving averages, not exponential, smoothed etc. I do not go there. I use the simple ones (o:
The 50 (orange) is sloping down and has already crossed down through the 100 (yellow) which is also sloping downward. The 200 is still sloping upward (red) which is a long term signal that this security may have some rough times in the near future but in the long run, for now, it is okay. In other words, I would be safe here but am not selling a long term hold. The long term moving average, the 200, is still sloping up.. Shorter term says to me "possible further pullback coming" But with earnings so close, and the market being so funky, who knows?
The 20 (blue) looks really bad and is the shortest term moving average on this chart so it should be on top of the 50, 100 and the 200. The 20 (blue) should not be below it's heavier counterparts like the 50, 100 and 200. But damnation, it is!
This particular security can move a lot in a day, but all in all, this one looks bad moving average wise )o:
In a perfect world the longer term moving averages are on bottom, with the shorter moving averages on top of it, preferably in chronological order with the shorter term moving averages on top and longer term moving averages on bottom and in order. I do not use a 5 day moving average. It is usually right on top of price. The 50 and the 200 are important to me. A day trader would most likely choose different moving averages. Dunno.
Then again, this scenario can change, and then the moving averages straighten out or slope upward before you realize it! If you buy pull backs or bottoms, this is an example of what you may be challenged with. The moving averages can look awful, until they change and start looking good. This is the reason many look at more than one indicator. Moving averages are often considered an indicator with bullish and bearish crossovers, the slopes of the moving averages, the order etc. Volume, support and resistance levels, any divergence with an oscillator, overbought or oversold conditions, and the whole market sentiment plus the chart patterns come in to play and so on. This is not an easy game we play.
Price is close to support. If broken, well that is another story )o:
It does not mean do not do it, just means be very, very careful (o: Negative volume is very high. Short interest is low at 2.2%. RSI is showing possibly a lot of supply at this level. It is "lingering".
Just an example of ugly moving averages except the 200 and is by no means, a recommendation
Cummins Inc. designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components worldwide. It operates through five segments: Engine, Distribution, Components, Power Systems, and New Power. The company offers diesel and natural gas powered engines under the Cummins and other customer brands for the heavy and medium-duty truck, bus, recreational vehicle, light-duty automotive, construction, mining, marine, rail, oil and gas, defense, and agricultural markets; and offers new parts and services, as well as remanufactured parts and engines.
From this short description, it is involved in a several industries or sectors and is why I bought it a while back. Yearly low is 192.72. Yearly high is 277.09. Price closed today at 232.10. I just am not sure CMI feels comfy at the higher prices it was at. Maybe it does not live there. Price usually returns home eventually.
But to examine moving averages, and these are simple moving averages, not exponential, smoothed etc. I do not go there. I use the simple ones (o:
The 50 (orange) is sloping down and has already crossed down through the 100 (yellow) which is also sloping downward. The 200 is still sloping upward (red) which is a long term signal that this security may have some rough times in the near future but in the long run, for now, it is okay. In other words, I would be safe here but am not selling a long term hold. The long term moving average, the 200, is still sloping up.. Shorter term says to me "possible further pullback coming" But with earnings so close, and the market being so funky, who knows?
The 20 (blue) looks really bad and is the shortest term moving average on this chart so it should be on top of the 50, 100 and the 200. The 20 (blue) should not be below it's heavier counterparts like the 50, 100 and 200. But damnation, it is!
This particular security can move a lot in a day, but all in all, this one looks bad moving average wise )o:
In a perfect world the longer term moving averages are on bottom, with the shorter moving averages on top of it, preferably in chronological order with the shorter term moving averages on top and longer term moving averages on bottom and in order. I do not use a 5 day moving average. It is usually right on top of price. The 50 and the 200 are important to me. A day trader would most likely choose different moving averages. Dunno.
Then again, this scenario can change, and then the moving averages straighten out or slope upward before you realize it! If you buy pull backs or bottoms, this is an example of what you may be challenged with. The moving averages can look awful, until they change and start looking good. This is the reason many look at more than one indicator. Moving averages are often considered an indicator with bullish and bearish crossovers, the slopes of the moving averages, the order etc. Volume, support and resistance levels, any divergence with an oscillator, overbought or oversold conditions, and the whole market sentiment plus the chart patterns come in to play and so on. This is not an easy game we play.
Price is close to support. If broken, well that is another story )o:
It does not mean do not do it, just means be very, very careful (o: Negative volume is very high. Short interest is low at 2.2%. RSI is showing possibly a lot of supply at this level. It is "lingering".
Just an example of ugly moving averages except the 200 and is by no means, a recommendation