Momentum investing involves taking advantage of, and making profits from, upward trends in a stock. The strategy makes a calculated bet that the stock market\u2019s recent winners will remain winners.<\/p>\n
Technical charts are some of the most valuable tools for momentum trading as they help traders to identify those trends.<\/p>\n
One popular technical chart used is the Simple Moving Average (SMA) chart.<\/strong><\/p>\n The SMA can indicate a potential buying opportunity for a stock \u2013 ie; when the stock price crosses above the SMA, it may suggest a bullish trend or the beginning of an uptrend.<\/p>\n \u00a0<\/p>\n Source: Fidelity<\/strong><\/em><\/p>\n \u00a0<\/p>\n The SMA is calculated by taking the average closing price of a stock over a specified period, and comparing that with the current stock price.<\/p>\n For instance, if you want to know the SMA for a stock over the last five days, you would add up the closing prices of the stock for the past five days and then divide by five to get the average.<\/p>\n Then compare that average price with the stock\u2019s current price.<\/p>\n As a general rule, if the current stock price is above the SMA, it tells you that the price trend is up, and that you should perhaps buy the stock; and vice versa if the price is below the SMA.<\/p>\n \u00a0<\/p>\n Traders often use moving average crossovers to identify trend reversals.<\/p>\n When a short-term SMA (e.g., 20-day SMA) crosses above a longer-term moving average (e.g., 200-day SMA), it\u2019s known as a \u201cgolden cross\u201d and may signal the start of a bullish trend.<\/p>\n Moving averages can also help traders identify breakouts from periods of low volatility.<\/p>\n For instance, if a stock price breaks decisively above its SMA after a period of sideways trading, traders may interpret this as a bullish signal to buy the stock in anticipation of further upside.<\/p>\n \u201cThe simple moving average acts as a guide, offering traders a road map through the ups and downs of market volatility,\u201d said technical chart expert, Mark Johnson.<\/p>\n \u201cIt\u2019s a trusted tool for navigating trends and identifying potential buying or selling opportunities.\u201d<\/p>\n \u00a0<\/p>\n (data from Commsec)<\/em><\/p>\n Code Name Last Price Value Price vs. Simple Moving Average Price vs. 20 day SMA Price vs. 50 day SMA Price vs. 200 day SMA AEI Aeris Environmental $0.07 >5% Above SMA 1 to 5% Above SMA >5% Above SMA >5% Above SMA AJL AJ Lucas Group $0.01 >5% Above SMA >5% Above SMA >5% Above SMA 1 to 5% Above SMA AMC Amcor Plc $15.05 >5% Above SMA 1 to 5% Above SMA 1 to 5% Above SMA 1 to 5% Above SMA PER Percheron Therapeutics $0.08 >5% Above SMA 0 to -1% Below SMA -1 to -5% Below SMA >5% Above SMA ANX Anax Metals $0.03 >5% Above SMA 1 to 5% Above SMA >5% Above SMA < -5% Below SMA CYM Cyprium Metals $0.04 >5% Above SMA >5% Above SMA >5% Above SMA -1 to -5% Below SMA MYG Mayfield Group Holdings $0.87 >5% Above SMA >5% Above SMA >5% Above SMA >5% Above SMA AXI Axiom Properties $0.06 >5% Above SMA >5% Above SMA >5% Above SMA — BNL Blue Star Helium $0.01 >5% Above SMA 1 to 5% Above SMA -1 to -5% Below SMA < -5% Below SMA WNR Wingara Ag $0.02 >5% Above SMA 1 to 5% Above SMA < -5% Below SMA — <\/p>\n WordPress Table Plugin<\/a><\/p>\n \u00a0<\/p>\n Anax Metals (ASX:ANX)<\/a><\/strong><\/p>\n Studies have commenced on a 20,000 tonne per annum copper equivalent production hub at Whim Creek.<\/p>\n Anax says it wants to establish a Pilbara Base Metal Alliance for several regional base metal projects to potentially participate in near term production planned for Whim Creek.<\/p>\n Whim Creek will become a centralised processing hub capable of treating a range of base metal ores within the Pilbara region, producing battery metal and agricultural products.<\/p>\n Barry FitzGerald did a deep dive into Anax Metals just this weekend past<\/a>.<\/p>\n \u00a0<\/p>\n Blue Star Helium (ASX:BNL)<\/a><\/strong><\/p>\n BNL says the maiden helium development well at Blue Star\u2019s Galactica\/Pegasus project is on track for drilling in Q2 2024<\/p>\n The Project\u2019s potential has already been proved by four successful exploration wells, with neighbouring third-party helium producer further de-risking the development.<\/p>\n The wells returned strong helium concentrations of 2-6.1% and flowed gas at rates of between 125,000 and 412,000 cubic feet per day.<\/p>\n \u00a0<\/p>\n Apart from the SMA, there are a couple of other indicators used by the market to signal momentum of any given stock, including:<\/p>\n 52-week High<\/strong> \u00a0<\/p>\n Traders often view the\u00a052-week highs\u00a0as entry signals.<\/p>\n This is due what\u2019s called the \u201c52-week high effect\u201d<\/strong> \u2013 where if \u00a0a price has broken out above its 52-week range, there must be some factor that generated enough momentum to further continue the price movement in the same direction.<\/p>\n On the other hand, if a stock is far away from its 52-week high, chartists believe the momentum will continue going that way.<\/p>\n \u00a0<\/p>\n 10 ASX small caps at 52-week high<\/strong><\/p>\n (data from Commsec)<\/em><\/p>\n Code Name Price How far from 52-Week High? 1 mth return 6 mth return 12 mth return AEI Aeris Environmental $0.07 0.00% 18.33% 184.00% 108.82% MYG Mayfield Group $0.87 0.00% 30.83% 81.25% 180.65% AXI Axiom Properties $0.06 0.00% 37.21% 47.50% 31.11% BOT Botanix Pharma $0.25 0.00% 4.26% 81.48% 184.88% M4M Macro Metals $0.02 0.00% 185.71% 566.67% 400.00% SW1 Swift Networks $0.02 0.00% 50.00% 60.00% 84.62% TRM Truscott Mining $0.07 0.00% 34.62% 16.67% 75.00% CYP Cynata Therapeutics $0.24 0.00% 27.03% 95.83% 46.88% BSE Base Resources $0.25 0.00% 127.27% 117.39% 35.14% PSQ Pacific Smiles $1.90 0.00% 17.65% 57.02% 41.79% <\/p>\n WordPress Table Plugin<\/a><\/p>\n \u00a0<\/p>\n Macro Metals (ASX:M4M)<\/a><\/strong><\/p>\n Macro announced that as part of the strategic review of the company\u2019s assets it was determined that the Aurora Lithium transaction, as announced on November 2023, is no longer aligned with the re-focused investment and development strategy of the company.<\/p>\n As such, Macro has elected not to exercise the option to acquire an 85% interest in the lithium rights of the Aurora Lithium Project from Aurora Energy Metals Ltd (ASX: 1AE).<\/p>\n Macro says its Cane Bore, Catho Well and Goldsworthy Projects already have the potential to deliver significant shareholder value.<\/p>\n \u00a0<\/p>\n Cynata Therapeutics (ASX:CYP)<\/a><\/strong><\/p>\n Cynata announced the completion of patient enrolment in its Phase 1 clinical trial of CYP-006TK in diabetic foot ulcers (DFU).<\/p>\n CYP-006TK is Cynata\u2019s topical wound dressing product candidate, which comprises MSCs (mesenchymal stem cells) seeded onto a novel silicon dressing.<\/p>\n Cynata says DFU poses a significant risk of infection, and if therapy is unsuccessful, amputation may be necessary. In this trial, CYP-006TK is being investigated as a potential treatment to promote wound healing in patients with DFU.<\/p>\n \u00a0<\/p>\n Here\u2019s another momentum signal used by the market \u2013 the Relative Strength Index (RSI).<\/p>\n RSI is a measure of the strength of a stock\u2019s momentum, either in the upward or the downward direction, and is used to indicate whether a stock is oversold or undersold.<\/p>\n Generally speaking, an RSI above 70 means a stock is strongly bought; and an RSI below 30 indicates that it\u2019s strongly sold.<\/p>\n An RSI above 80 meanwhile is extremely bought, and an RSI below 20 is extremely oversold.<\/p>\n 10 ASX small caps with RSI over 70:\u2028<\/strong><\/p>\n (data from Commsec)<\/em><\/p>\n Code Name 2 Day RSI 9 Day RSI 14 Day RSI AMC Amcor Plc — Overbought Overbought BKY Berkeley Energia — Overbought — BOT Botanix Pharmaceuticals — Overbought — BPH BPH Energy Overbought Overbought — M4M Macro Metals Overbought Overbought Overbought SW1 Swift Networks Group — Overbought Overbought DYL Deep Yellow — Overbought — RHK Red Hawk Mining — Overbought Overbought OMH OM Holdings Overbought Overbought — ODA Orcoda — Overbought — <\/p>\n WordPress Table Plugin<\/a><\/p>\n \u00a0<\/p>\n Swift Networks (ASX:SW1)<\/a><\/strong><\/p>\n Swift reported a solid quarter ending 31 March.<\/p>\n Cash position was above $2.0m, with cash from operations, excluding interest, remaining positive for the quarter.<\/p>\n Swift announced $2.0m subscription extension and network infrastructure upgrades to Pilbara Minerals, Shell, AngloGold Ashanti, Iluka Resources, Northern Rise and Genesis Minerals.<\/p>\n <\/span><\/p>\n The post Hot Money Monday: The Simple Moving Average chart, and how it\u2019s used to profit from a stock\u2019s upward trend<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Example of a Moving Average Chart<\/h2>\n
Other ways to use the SMA<\/h2>\n
10 ASX small caps at prices above SMA<\/h2>\n
Other \u00a0momentum signals<\/h2>\n
\nRelative Strength Index<\/strong><\/p>\nThe 52-week highs<\/h2>\n
The Relative Strength Index<\/h2>\n