Several stocks are now trading above their 200 day simple moving average.  This is a key support/resistance level that is closely watched by institutional traders.  As we continue higher, there will be more stocks pushing past this level. 

An ideal setup for a long entry is when the stock pulls back to test the 200 SMA once it has moved through that area.  Old resistance will become new support, but before trading higher, the stock will usually come back down to test the 200 SMA to confirm support.  At that point a long entry is warranted.

In general, a good rule to follow is not to purchase stocks that are trading below their 200 SMA.  Granted, right now that is not a very large universe.  When coming off of a bottom like we are currently doing, this rule is waived.  However, in a normal market, the aforementioned rule is a good one to pay attention to.  We will begin to see more stocks moving above their 200 SMA and retesting that moving average.

  It would be considered a very bullish confirmation when the 50 day SMA moves from below to above its’ 200 SMA.  When the major indexes exhibit that pattern, you can be comfortable that we are solidly back in a bullish bias market.  Typically, 70-75% of stocks will follow the major index trends.  Stay long until the 50 day SMA crosses from above the 200 day SMA to below.  At that point go to cash / bonds or short the market.

Make sure that you do your own due diligence and that you diversify your holdings.  Best, Robin

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