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ARCHIVE:    JUNE/JULY  AUGUST/SEPTEMBER

An InvestorLinks article
distributed every market day.

Galileo Technology (NASDAQ: GALT)
Market Call™ for September 23, 1999
Contributed by Mark Seleznov, TrendTrader.com.

The purpose of this Market Call section is to educate readers in technical analysis patterns and indicators. As with all investment information, you need to research information and consult your financial advisor before initiating any strategies that are contained in Market Call.

Also, you must realize that as with all trading strategies, opinions can change quickly depending on market conditions and developments.

This column tries to present historical examples, potential set ups, and examples of entry and exit strategies.

Moving Average Crossovers

There are two moving averages over the price of the security. Moving averages are one of the oldest and most popular technical analysis tools. A moving average is the average price of a security at a given time. When calculating a moving average, you specify the time span to calculate the average price (e.g., 20 periods). The periods may be 5 minute, 15 minute or daily time frames. I use moving averages and crossing moving averages in my intra day trading as well as in my short term trading.

There are three popular types of moving averages: simple (also referred to as arithmetic), exponential, and weighted. The only significant difference between the various types of moving averages is the weight assigned to the most recent data. Simple moving averages apply equal weight to the prices. Exponential and weighted averages apply more weight to recent prices.

The moving average crossover method calculates two moving averages, each based on a different number of periods of trading data. When the shorter-term (fewer days) average crosses above the longer-term average from below, this is a buy signal. When the shorter-term average crosses below the longer-term average from above, this is a sell signal.

Moving averages are used to smooth prices, dampening the distractions of short price movement so that the underlying trend is clearer. Moving averages always lag the market and, therefore, will never buy market bottoms or sell market tops. Like any other trend-following system, the moving average crossover will perform best when markets are trending because it automatically places the trader on the right side of every extended move. When markets are moving sideways, however, the lack of extended moves will cause losses.

When they work, the profits in the trades can make up for many small losses. The Moving averages that you are looking at are 5 and 20 period exponential moving averages on 60-minute bars.

Let's look at Galileo Technology, (NASDAQ: GALT) over the past few weeks using this method.

Over much of the past month, following the moving average crossover method and staying in market either long or short with the signal would have produced some very good signals.

While being short from late August, GALT gave a Buy signal on September 9. This stayed in place until the gap down on Monday, September 21.

I am not sure what caused this drop, but GALT has now signaled another Buy today, September 22, 1999. I would Buy GALT here. I would place a stop at 28 7/8.

Chart courtesy of
 


Interested in adding Market Call to your website?
Click here for details: Market Call Information

Mark A. Seleznov is a General Securities Principal and Managing Partner of Trend Trader, LLC, a NASD, SIPC broker/dealer firm located in Scottsdale, Arizona. A professional trader for over 25 years, Mark was a Market Maker on the Philadelphia Stock Exchange, a Retail Registered Representative, and futures trader. Mark is an author and recognized expert in equity Day Trading. He conducts seminars in Equity Day Trading and offers his firm traders training and support. If his firm holds any positions in the public companies he writes about, it will be noted at the bottom of his article.

Market Calls is a daily syndicated column on trading by Mark A. Seleznov, Managing Partner of Trend Trader, LLC. For information on obtaining Market Calls for your web site, newspapers, or publication, contact
Trend Trader, LLC at 602-948-1146

Disclaimer: Trading in securities may not be suitable for all individuals. Consult your broker or other professional to determine your suitability. This is not an offer to buy or sell securities. The advice given above is of a general nature and should not be taken as a recommendation to buy or sell the referenced security.

 
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