I have a bit of a theory about MA lines and resistance lines. It's not anything I've read anywhere, it just makes sense to me...
It relates to a situation where 2 Moving Average lines both head beneath the nearest Resistance level to the SP, which often happens after a long Downtrend. My theory is, this gives the SP some "Wiggle Room" between the MA lines and the Resistance Level. The effect of this is by heading up to the Resistance level, it drags the shorter period MA line above the longer period MA line, forming a Golden Cross and we know this is the kind of TA event that is likely to reflect the momentum required to finally break that Resistance line... and this could signal the end of the Downtrend. (of course, it needs a fundamental reason to do this, otherwise it might just continue south - the point is the "Wiggle Room" gives it a chance of Escape Velocity.)
So, in chart above example, the 50 day MA is at 23c, while resistance is 24.5c. The SP has "Wiggle Room" up to 24.5c if a fresh burst of positivity arises and This will result in the 20 day MA Golden Crossing the 50 day MA and in theory that momentum should be sufficient to crack the resistance line. The same thing is then possible with the 100 day MA, which is about to fall below the level of our next resistance line at 28c.
What do you reckon, Chartists? Make sense or BS? I think I'll call it Wiggle Room theory.
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[IMG] I have a bit of a theory about MA lines and resistance...
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