Convergence
of
Simple Moving
Average
The
convergence of several moving average when they are all
at approximately the same point reflect a very fine
balance between buyers and sellers.
A
sharp price move is
often preceded by a gradually narrowing trading range.
In effect, decreasing price fluctuations reflect a very
fine balance between buyers and sellers. When the
balance is tipped one way or the other, the price is
then free to embark upon a major move.
T
his kind of situation
can often be identified by plotting several MAs and
observing them when they are all at approximately the
same point.
The convergence of the averages tells us
that the balance between buyers and sellers is very
evenly matched and warns that a major move is likely.
The actual signal comes from the violation of the up trendline.
Moving Average - Convergence of
Simple Moving
Average
