First Close Below the 10 Week MA

Note:  The historical stock examples given below are for EDUCATIONAL USE ONLY.  They ARE NOT to be used to make buy/sell decisions in today's market.  For more information, please read the HSR Terms of Use.

Description

Price closes below the 10 Week Moving Average (MA) for the first time since starting its uptrend.

Behavior Note:  After closing below its 10 Week MA, price may fail on its first attempt to rally back above the 10 Week MA.

What you need to know

Following an uptrend, the first close below the 10 Week MA may serve as an early warning sign that a stock is entering into a basing phase of unknown depth and duration.

When you see a stock close below its 10 Week MA for the first time, you may want to monitor its price action for signs of support and other behaviors common to a basing phase.

A trend will usually continue in the direction of the initial move after a countertrend move plays out.

For stocks, this may be true under the following conditions:

1. The company has strong earnings and sales growth or is perceived to have future growth.
2. The stock never formed a base or tested its 40 Week MA.
3. The stock outperformed during a flat to declining general market environment.
4. The stock's peers are showing similar bullish price action.
5. The general market is in an uptrend.

Historical Stock Chart Examples 1A & 1B: Skechers (SKX) 2000-2001

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