Here's an article which tests the widely held belief that crossing above the 200 day moving average is a bullish event. (warning, if you have a pop-up stopper, turn it on b4 clicking that link.) After running several tests, this is the author's conclusion:
Arguing about the trend of the market based on the 200-day moving average might be fun at cocktail parties (depending on your definition of fun) but won't really make anyone money. Instead, buying when the trend is absolutely, unequivocally down and the market is plummeting vis a vis its 200-day moving average is usually the best time to take a trade on the long side. By the time the talking heads are debating a new trend when price closes above the 200-day moving average you are long gone out of the market, hopefully on vacation.
I am diametrically opposed to that viewpoint, but it certainly can work. (There are many ways to make money in the market.) I will rarely, if ever, buy a stock as it's crossing over a moving average. I'd much rather let it rise above the average and then buy it on the inevitable retest of the average from above. Preferably after it's made some kind of bullish reversal candle on, or near the average. So I'll continue to use moving averages to define trends, and then trade with the trend. Remember, the trend is your friend.
