Page 214 - THE MARKET WHISPERER

210 PART 7 - Indicators: The Trader’s Compass

Example of 200MA Resistance for TEVA Pharmaceuticals, TEVA

TEVA maintains a clear downtrend right beneath the 20MA line. The
50MA line is properly positioned above the 20MA line, and finally, the
200MA finds itself between them. At [1], TEVA tries to reverse trend,
crosses the 20MA line, crosses the 50MA line, and then rams its head
against the 200MA ceiling. The 200MA line’s resistance is an amazing
phenomenon that recurs several times. What does it mean for you?

Let’s say you wish to buy TEVA because you believe it will move higher.
Don’t buy it when it is just below the 200MA line, since the stock shows
difficulty in crossing that barrier. If you bought the stock much lower than
the 200MA, it would be wise to realize some of the profit as it approaches
that line.

While we are already paying close attention to TEVA’s current status, we
should also notice the beautiful consolidation at [2]. The stock is “picking
up steam” and is about to move sharply in one of two directions, up or
down. Both of them are suitable for trading and it is likely that both would
make good trades. I followed the stock with the intention of trading if and
when it decided to leave that short range area.

In the end, I couldn’t resist. Here is the outcome, just weeks after I
wrote the paragraphs above: a jump of 9% within several days. Sometimes
it seems that this game is just too easy…