An
InvestorLinks article
distributed every market day.
Coca
Cola Company (NYSE: KO)
Market Call™ for October 11, 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 Averages and Moving Average Crossovers
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 period) 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 a stock is trending up and down, moving average crossovers look great.
During periods of consolidation, moving averages generate many trades but
do not produce superior profits. Let’s look at a good example of
moving average crossovers.
Coca-Cola Company (NYSE: KO)
After congestion from September 8 through September 21, KO broke down on
September 22.
Notice how from the break at 55, a trader using moving averages would have
stayed short or out of the KO until October 6 at 49 �.
A moving average technical trader would be in KO here and stay in until the
next signal.
Is it too late to get into a stock that has moved so far from the moving
average entry? The answer is no. A stock that is in a trend can be entered
on a retracement or consolidation at the moving average crossover pivot point.
In this case, KO can be bought here and an exit of the long position should
the moving averages cross back to a sell.
I would Buy KO here.
If there is a change in direction, the moving averages should cross back in
the 51 � area. This would be my stop, 51 �.
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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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1998-2000 Tulips and Bears LLC.
All Rights Reserved. Republication of this material,
including posting to message boards or news groups,
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Last modified: March 17, 2001
Published By Tulips and Bears
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