re: xhosa xhosa - yes it is a moving average - an exponential...

re: xhosa xhosa - yes it is a moving average - an exponential moving average. I won't give you the calculation - lol! - but if you are interested you can look it up here...

In a nutshell the most recent data is given more significance than the oldest within the 26 week 'window' - unlike just an average where you basically add it up and divide by 26.

In "normal" situations I find ALL stocks in uptrends retrace to at least a point of a 13 week ema - and often a 26 week ema - and in really pronounced corrections the 50 week ema - such as when the all ords corrected between end of January last year and early May.

Can you measure your portfolio by the ema you ask?! A very good question - and in fact that is exactly how I measure my net worth! Unlike day traders and instant bull market guru's that have crawled out of the woodwork and into this chat room - I don't sit back and look at my net worth based on closing prices each day. What I do measure is where the 26 week ema is on each stock and add that up once a month - I then plot that and measure how I am doing.

The problem with measuring things on a daily basis as I see it is that you miss out on the big moves - and these often take time to develop - and most of the time the stock price spins its wheels in a range and then dramatic price increase occur in a comparitively small span of time.

Of course if you apply this logic then you have to be careful in your stock selection and do your homework - no point applying this logic to a Uramium dud stock that has a snow balls chance in hell of ever being successful - more applicable to the best stocks in financial performance in their sector (and sectors with the most positive sentiment helps a lot) OR if the financials are not there yet - then at least have some forecasts with a 'buffer' that even if they miss you will likely make money anyway.

Unfortunately we don't get enough decent discussion around here on what really drives stocks - earnings power! and/or the future continuance of that.
Large caps I can understand the boredom of such - but many mid caps I have raised for discussion and no one reads the posts even - eg JET,NBL,IWL,BOL etc... and look how they are doing. Of course others falter as their financials do not continue and you have to exit such stocks - and some I have done this on have been CCV (although might be turning again), AMM (also might turn), GLI (don't touch for now!!) - thats why it is important to stay atuned as best one can - we can only do our research as best we can and have faith in the company to continue to deliver - some do and some don't. Those that do become long term trends and those that don't we exit - and because we are always doing research we have something else lined up to swap to - there should always be more opportunities on our radar than money we have to invest.

All the best.