The 200 day moving average or 200DMA is probably the most used moving average indicators used for the longer term position prespective.
As shown in the TOLL example along with the Fibonaci retracement tool, a blend of support and resistant points, the 200 DMA can really give a guide to what is happening with a stock price movement with the added advantage of entry and exit points with the Fib.
Toll began its bull surge back in the beginning of 2003 and as you can see confirmed this with plenty of support every time it came into contact with the 200 DMA between 2005-2006 and then ran away for another year after April 2006. Its interesting to note back in the beginning of 2006 it ran down hard but came racing back after it hit the 78.6% or $5.84 and broke through the 200 DMA once again.
It confirmed its breakdown in 2008 crossing down the 200DMA and also the 23.6% fib or $12.63 and continued down without even challenging the 200DMA for up to15 months until now.
OKÖ I can hear the fundys saying yer but that was a bull market back then and oil did hit $150 BUCKS to cause the price to spiral out of control, but the point of this exercise is for chart pattern recognition without to much noise.
So where to now?
As you can see now itís finally hit the 200DMA with a lot of selling resistant pressure. But the interesting dilemma is it is also caught at the 78.6% Fib support line.
My interpretation would not to be trading this and to see which way it will go because if it hit heads down and breaks through the 78.6% support line the new lows will be tested very quickly. Itís even risky for a short play at this stage .On the other hand if it spikes up through the 200 DMA there is a good chance of a trend reversal.
Anyways, I thought I would share this with you and another tool to throw into the traders toolbox.