Moving average squeeze

moving average squeeze Trading lessons

“The Moving Average Squeeze”?

I have seen stocks go through something I call the moving average squeeze.

What it is is when a stock consolidates between the 200 day moving average and the 50 day moving average.

What typically happens is that the stock eventually gets “squeezed” out of the moving averages.

Just like what is happening right now with the Semiconductor Holders.

Some observations about this pattern:

  • The 50 and 200 day moving averages go in the opposite direction. If the 50 day moving average is rising, then the 200 day moving average is declining
  • The 200 day moving average usually wins. The inevitable breakout typically goes in the direction of the 200 day moving average. For the Semiconductor Holders, the 200 day moving average is going down.

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