Coach Mark here. I use moving averages in almost all my decision-making process to one degree or another. One of the more interesting situations I run into with moving averages is when you encounter a moving average pocket.

A moving average pocket is the space between one moving average and another. Sometimes these are quite narrow but in uptrends they can become quite sizeable. Where it gets interesting is when you “enter the pocket.”

This occurs when you fall below short-term moving averages but are still above longer-term moving averages. This is the situation that we find ourselves in with the S&P 500 and Nasdaq over the last week.

In this situation short-term moving averages often act as resistance and can lead to you “filling the pocket” where price works itself down to the rising moving average. The Nasdaq did this to the penny today.

Knowledge of moving averages can help guide you in your short-term decisions and are a major point of emphasis at Tackle Trading.

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Chart of the Day: Nasdaq (/NQ)

The Nasdaq experienced a classic moving average pocket fill over the last week after breaching the 20-day moving average and methodically working down to the 50-day moving average. This is where it gets really interesting. Does the 50-day serve as a support bounce or do we start to work into that very large moving average pocket between the 50 and 200.

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