1. MA Moving Average#
MA20, 60, 120 represents the average stock price of the specified number of days/hours ago.
It represents support or resistance lines.
2. MA30 and Gulanbi's Rule#
- The moving average gradually levels off or rises after a downward trend, and the stock price breaks through the moving average from below. (Bottom breakthrough, golden cross)
Bottom breakthrough will result in (1) the leveling off of the moving average, (2) a decrease in the distance between the stock price and the moving average, and (3) the cleansing of chips. This makes it easier for the stock price to transition from bearish to bullish, and the subsequent rise in the stock price will also cause the moving average to trend upwards, thereby generating a boosting effect. The upward trend after the bottom breakthrough and the official breakthrough of the moving average can be considered as the initial rising trend of wave theory.
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The moving average continues to rise, and although the stock price falls below the moving average, it soon returns above the moving average. (False breakdown, testing the support of the moving average)
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The stock price continues to rise, far away from the moving average above, and suddenly drops but does not break below the rising moving average. When the stock price rises again, it can be an opportunity to add positions. (Significant rise, minor pullback, trend remains unchanged)
When the positive deviation between the stock price and the moving average is too large, the stock price will face resistance to further rise, which is a retracement phenomenon in a bullish trend. When making decisions based on this rule, it is important to determine whether the stock price is in the early stage, middle stage, or late stage of an upward trend. Generally, it is more applicable in the early stage of an upward trend.
- When the stock price is below the moving average and suddenly plummets far away from the average, it is highly likely to return to the moving average. (Deep decline, rebound)
This is a rebound in a bearish trend, also known as "excessive negative deviation," but it is not a positive buying point. It is only an opportunity to profit from short-term positions. Conservative or inexperienced investors may adopt a wait-and-see attitude to avoid mistaking the rebound correction for a bullish trend, leading to subsequent losses. The deviation rate will reach its highest point before the stock price reaches its highest point, and it will reach its lowest point before the stock price reaches its lowest point.
- The moving average gradually levels off or declines after an upward trend, and the stock price falls below the moving average from above. (Establishing a range, death cross)
Establishing a range will result in (1) the leveling off of the moving average, (2) a decrease in the distance between the stock price and the moving average, and (3) selling at high levels. This makes it easier for the stock price to transition from bullish to bearish, and the subsequent decline in the stock price will also cause the moving average to trend downwards, thereby generating a downward effect. The downward trend after establishing a range and officially breaking below the moving average can be considered as the initial declining trend of wave theory.
- The moving average continues to decline, and although the stock price rises above the moving average, it soon falls below the moving average again. (False breakout, testing the resistance of the moving average)
This is the stock price testing the resistance of the moving average during a rebound. Candlestick patterns are also referred to as rebounds, escape attempts, or false breakouts. Long positions should be closed as soon as possible or short positions should be taken advantage of at high levels.
- The stock price continues to decline, far away from the moving average below, and suddenly rises but does not break above the falling moving average. When the stock price falls again, it can be an opportunity to add short positions. (Significant decline, minor rebound, trend remains unchanged)
Generally, during a market decline, there are often several sell signals like this. When the negative deviation between the stock price and the moving average is too large, the stock price will have the inertia to rebound, which is a short-term rebound phenomenon in a bearish trend. When making decisions based on this rule, it is important to determine whether the stock price is in the early stage, middle stage, or late stage of a downward trend. Generally, it is more applicable in the early stage of a downward trend.
- When the stock price rises sharply and far away from the moving average above, it is highly likely to return to the moving average. (Excessive surge, overheated)
This is a pullback in a bullish trend, also known as "excessive positive deviation," but it is not a positive selling point. It is only an opportunity to profit from short positions. Conservative or inexperienced investors may adopt a wait-and-see attitude to avoid mistaking the pullback correction for a bearish trend, leading to subsequent short squeezes. The deviation rate will reach its highest point before the stock price reaches its highest point, and it will reach its lowest point before the stock price reaches its lowest point.