Index

UNDERSTANDING THE MOVING AVERAGE EFFECTS ON INDEX

HERE THROUGH SOME DSE CHARTS I WILL TRY TO INDICATE THE EFFECTS OF VARIOUS MOVING

AVERAGES ON THE GENERAL INDEX

DEFINITIONS

1. A simple moving average (SMA) is the unweighted mean of the previous n data points. For example, a 10-day simple moving average of closing price is the mean of the previous 10 days' closing prices.

** Remember >> moving average levels are interpreted as support in a rising market, or resistance in a falling market

2. A weighted average is any average that has multiplying factors to give different weights to different data points. Mathematically, the moving average is the convolution of the data points with a moving average function; in technical analysis, a weighted moving average (WMA) has the specific meaning of weights which decrease arithmetically. In an n-day WMA the latest day has weight n, the second latest n − 1, etc, down to zero.

First let us see what these moving average means

This was the story of June ….

THESE ARE FEW MOVING AVERAGE LINES ………..

FIRST TIME IN MANY WEEKS, THE RED CANDLE’S LEG TOUCHED THE 8 DAYS EMA, ON 5TH OF JULY AND THE TROUBLE BEGAN

NOTICE HOW THE WMA BENT TO ABSORB THE INDEX WEIGHT, IT LOOKS SOOO HEAVY …… CAN IT ABSORB THE WEIGHT ???

BUT THE NEXT DAY, wma gave up, INDEX PENETRATED AND FALL BELOW WMA 8

THAT WAS AN OMNI0US SIGN FOR THE TA

ON THE THIRD DAY, INDEX RAPTURED 15 DAYS AVG LINE, PUSHING ACROSS 8 DAYS WMA ALSO FAILED

NOTICE THE DIVERGENCE OF THREE AVG LINES. COULD HAVE BEEN A STRONG SUPPORT.

BUT THE INDEX PENETRATED 12 DAYS WMA ON THE NEXT DAY ( 9/7)

NOTICE THE CONVERGANCE OF 15 DAYS MOVING AND 12 DAYS WMA. INDEX GOT SUPPORT HERE

THAT WAS JUST WOW ! AS THE MOVING AND WMA BOUNCED THE INDEX UP ABOVE EVEN THE 8 DAYS WMA ! IT WAS A GOOD SIGN FOR THE TA’S

Something unexplainable happened on 12 July. Good

volume with a bounce should been enough for trending up

July the 13th: index became too heavy, penetrated 8 days wma, but look at the wma 12 and 15 days moving average : how they tried to stop further fall.

Though the TAs kept their finger crossed, index became super heavy and it not only penetrated the first three lines, it also penetrated the strong 15 days WMA line ( red)

SO THE INEVITABLE HAPPENED. LOOK AT THE FREE FALL !!

MOVING AVG 35 CAME INTO RESCUE, BUT IT WAS RAPTURED DUE TO THE FREE FALL MOMENTUM

ONE MORE FREE FALL. BUT NOTICE THE CONVERGANCE OF THE LOWER TWO LINES ( 50 WMA AND 50 MA), APPARENTLY WOULD TRY TO STOP FURTHER FALL. LETS SEE WHAT HAPPNENS NEXT

1. 21 JULY : 50 DAYS WMA AND MA PROVIDES STRONG SUPPORT

2. 22 JULY :IT IS BOUNCED UP. BUT NOW THE PREVIOUS FRIEND, 8 DAYS WMA HOLDS ITS

UPMOVE; THIN RESISTANCE

INDEX MANAGES TO CROSS 8 DAYS WMA, BUT AGAIN GETS CAUGHT BY 35 DAYS MA

26 JULY : UNFORTUNATE, FRIENDS BECOME FOE. LOOK AT THE TWO MA CONVERGING WITH A VOW TO PUSH INDEX DOWN. A STRONG RESISTANCE AHEAD AS PER TA ! LETS SEE ..

27 JULY: HEAVY DOWNWARD PRESSURE: INDEX PENETRATED 50 DAYS WMA AND 50 DAYS MA !

LOOK AT

THIS GAP. WILL THERE

BE A FREE FALL

AGAIN ??

HOPE : I AM DRAWING A HORIZONTAL LINE ALONG THE LAST TWO LOWEST POINT. LET US EXTEND IT TILL ONE MORE YEAR IN THE PAST

THIS IS A COMPACT CHART SHOWING TILL 2007

NOTICE THESE THREE POINTS. ALSO NOTICE THE INDEX (2800)AS WELL

ZOOMED NOW

NOTICE AGAIN : INDEX CROSSED/ TOUCHED BELOW 2800

SO WHAT DO YOU THINK ?

WHAT CAN BE THE LIKELY TREND OF THE INDEX ?

WHICH CONDITION SHOULD BE FULFILLED FOR A RISE TILL 3000 ?

YOU MAY READ MY YESTERDAYS POST ON INDEX AND VOLUME ANALYSIS IF YOU LIKE TO KNOW MORE ABOUT VOLUME, WMA AND INDEX MOVEMENT