The 200-Day Moving Average: The Indicator That Keeps You on the Right Track in the Stock Market
Welcome, fellow traders! Today we’re diving into the exciting world of Canadian technology stocks. We’ve scoured the market and identified five tech companies that are either breaking out or ready to break out above the reliable 200-day moving average. This indicator is like a dependable companion, always there to remind us of the long-term trend. So, buckle up and prepare to ride the wave of these potentially profitable stocks.
The 200-day moving average is like the “dependable friend” of technical indicators – always there to keep you on track and remind you of the long-term trend. When a stock is trading above this reliable moving average, it’s in an uptrend. But, when it dips below, it’s in a downtrend.
One strategy is to “ride the wave” of the trend by buying when a stock breaks out above the moving average and selling when it falls below, like catching a wave at the beach. Or, you can use the 40-week moving average on the weekly chart to identify the 200-day moving average, like a surfer using a bigger board to catch bigger waves.
In practice, professional traders and investors use a combination of indicators and analysis, like a surfer using different boards for different waves and conditions. The 200-day moving average is just one tool, but an important one to have in your toolbox, like a good surfboard wax.
Enjoy the charts below!
iShares S&P/TSX Capped Information Technology Index ETF (TSX:XIT)
This ETF is a selection of Canadian technology stocks that aims to achieve long-term growth by closely tracking the performance of the S&P/TSX Capped Information Technology Index. Recently, we’ve noticed the ETF breaking out from a falling wedge pattern at the end of November when the price exceeded the 40-week moving average, which put the sector on our radar. The price then spent December stabilizing above the falling wedge through a continuation pattern known as a bull flag. In the last three weeks, the upward momentum has increased, pushing the price higher from the bull flag and drawing our attention back to Canadian technology stocks.
Constellation Software Inc. (TSX:CSU)
Constellation Software first caught our attention on November 16th, when the stock was trading at $2045, and we recommended that our readers put it on their watchlist. We then signaled to our readers five more times as the upward momentum increased. The next signal came on November 23rd at $2083, as the stock was on the verge of breaking out from a continuation triangle. Since then, the stock price has risen by $272, or 13%, and is now setting up below a new all-time high. Keep an eye out for a breakout and read my blog article for simple strategies on how to trail momentum with a stop-loss order after a technical signal is given by clicking here.
Converge Technology Solutions Corp. (TSX:CTS)
Converge Technology Solutions appears to be positioning itself below a significant horizontal resistance line and the 40-week moving average. Pay attention to the large volume by price bar on the right side of the chart, which aligns with the horizontal resistance line. This indicator indicates a significant area of accumulation and distribution. A breakout above that volume by price bar would be highly bullish, as it not only suggests a continuation of the upward trend, but it also implies that the stock, which has been consolidating in that area, is likely to have gained more strength due to the consolidation and is now in stronger hands.
Nuvei Corporation (TSX:NVEI)
Nuvei is breaking out from a large falling wedge bottoming pattern and is beginning to move above the 40-week moving average. Keep an eye out for further upward momentum.
Shopify Inc. (TSX:SHOP)
Shopify first caught our attention on January 19th, when it was trading at $54.16 and showing signs of breaking out above the 200-day moving average. We recommended adding it to a watchlist and noted that it was setting up at the right side of a large bottoming base. On January 25th, Shopify’s price reached $62.30 and we saw it officially break out from that base. Since then, the stock has risen by 23% or $12.5. For more information on how to effectively trail momentum with a stop-loss order after a technical signal is given, check out our blog article by clicking here.
Topicus.com Inc. (TSXV:TOI)
Topicus appears to be forming a bottoming triangle as price action consolidates towards the apex, and above the 40-week moving average. Keep an eye out for an upward breakout, and also pay attention to the weekly PPO momentum indicator to break out above the zero line, which would signal a positive shift in momentum.
Conclusion
In conclusion, the 200-day moving average is an important tool for identifying long-term trends in the stock market. While it’s just one of many indicators that traders and investors use, it’s definitely one worth keeping in your toolbox. As for the future of these Canadian tech stocks? Well, I don’t know what’s going to happen – I’m just a dude drawing lines on a chart. But, with a little bit of analysis and a lot of luck, you might just catch that big wave of profits. So, grab your surfboard (or your trading platform) and let’s see what the market has in store for us.
And if you liked this blog post, share it with a friend! Or don’t, we don’t really care. But either way, grab a Tim Hortons coffee and keep on trading, eh!
To learn more about chart patterns and how to trade them, visit our education section by clicking HERE.
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