Technical Stock-Picking: Get to Know the Moving Average

This technical-analysis-based assignment was written by Stockpickr member Ira Krakow.

Pure technicians ignore the stock's fundamentals , concentrating instead on the tug of war between the bulls and the bears , as shown in the chart's price movement (see "Technical Stock-Picking: How to Trade Off of a Chart"). If the bulls are winning, the price moves up. If the bears are in control, the price goes down.

Rev Shark: It's in the Charts

In this assignment, you will learn how to use the most common technical tool: the moving average .

A Look at Microsoft's Chart

Let's look at Microsoft's (MSFT) one-year line chart for 2007:

Click here for larger image.

Microsoft zigged and zagged during the year, trading in about an 11-point range, between $26 and $37. Clearly there were many times when you could have reaped a short term profit , if you could have figured out how to buy one price and sell a higher one.

For example, if you bought Microsoft on Oct. 22 at the open (for $30.12) and sold on Nov. 2 at the open (for $37.22), you would have captured the biggest price move in the shortest time period, a 22% gain -- 7 out of the 11 points -- in less than two weeks. The strategy here: time your trades to capture the biggest percentage move in the shortest period of time. But how?