Tackle Today: The 20-day SMA
January 6, 2021
≈ This is a must-have for short-term traders ≈
We are continuing our brief exploration of moving averages with a look at the popular 20-day simple moving average (SMA). Consider it the go-to benchmark for identifying the short-term trend. The strongest stocks will be rising above it. When prices fall below the 20-day, it’s not necessarily a trend reversal but a weakening of the trend.
Please note where the 20-day sits when analyzing the bull retracement patterns in our weekend Scouting Reports. Occasionally we’ll include an uptrending stock that’s pulled below the 20-day, but it’s not common. Most buy the dip opportunities will find buyers above or at the 20-day. It’s a hot spot for bulls to gather when waiting to join a trend.
It allows them a lower-risk entry on a stock that was recently too high to purchase.
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Chart of the Day
Caterpillar Breakout
Caterpillar is breaking out on Wednesday. It has been in a high base pattern, with the 20 SMA trending upward. It was also a candidate on this week’s options report. Review the full report here: https://tackletrading.com/options-report-january-2nd-2021/
Video of the day
Analyzing DKS as a potential Covered Call
Coach Emily discusses a potential Covered Call trade in Tuesday’s Halftime Report in this video clip.
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