Market Lab Report - 6/20 moving averages
The 620 is shorthand for 6 day exponential moving average and 20 day simple moving average on a 5-minute bar chart. It is an intraday trading guide that can help one enter stocks that are pulling back constructively, though a volume dry up pattern where the stock starts to trade in a tight range on lower volume near support is also a good clue that the stock may be setting up to move higher. We have discussed this in some detail in a number of our webinars.
The 620 can also be used on buyable gap ups such as TWLO today. TWLO proceeded to move lower minutes after it gapped higher at the open. One can use an upside crossover of the 6/20 moving averages to enter a position in a BGU. This occurs when the 6 day crosses back above the 20 day. This did not happen, so one could avoid TWLO altogether, as it has closed its gap so is no longer a buyable gap up.
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