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To: Gerald Walls who wrote (12700)	2/26/1998 8:18:00 PM
From: sepku	Read Replies (2) \| Respond to of 77400

>>>How do you figure this? All it means that the stock is above the average price of the last 200 days. The only way that someone who's held the stock for 200 days is making money is if today's price is is more than what it was 200 days ago.<<< First of all, ASND is trading over its 200-day exponential moving average (ema), not the simple(dma or ma)...I corrected myself on that point a couple days ago. Second...you misunderstood what I meant, so you must also have a misunderstanding of what dma's are all about in TA. The dma trendline identifies the "trend" using the average price at which a stock exchanged hands within its timeframe of reference. The theory behind it centers around market psychology. In your rationale, you are forgetting the *average* part of "moving average". Someone who bought a stock 200 days ago at a certain price is only one speck of data (in the battle between bulls and bears) that determines the closing price of a stock that day (the person could have bought at any part of the daily range), and that day's closing price is only one speck of data in the equation that spans 200 days of variables. Over the course of 200 days, a stock may break +/- through its trendline, so a person COULD buy a stock 200 days ago and still be underwater, while another bought that same day and is now making money because he bought lower on the range. Besides, my point of the significance of the 200dma has little to do with whether the investor bought 200 days ago, or last week. My point is the psychological support of the stock. Since the price of a stock is the consensus of value among all market participants at that given moment, the closing price is the average price per share paid for that stock throughout that trading day. Therefore, if you average this data across a "window" of time, you are able to calculate the average price payed by all market participants throughout that window. So, you are now able to determine the psychological trend of the stock by noting the relationship between the share price today, and the trendline itself. Example: if the XYZ is $43, and the 200dma is currently positioned at 38.34, then XYZ is confirmed to be in a bullish uptrend due to its position above the 200dma. That is, if the average mass consensus value (price paid) over the past 200 days by shareholders is below the price today, than psychologically this is bullish. The reason being that most bulls (longs and buyers) are in positive territory and more likely to be confident, willing to hold, and maybe accumulate, while bears (shorts and sellers) are feeling the pressure of diminished profits or increasing losses, and more likely to cover to reduce exposure or if they are longs planning to sell, they might decide to "hang in there" longer. The steeper the trendline, the more convincing the trend. Of course, the length of the window changes the equation and shifts its importance/accuracy. The 200dma is a very popular (and therefore powerful) trendline because it is largely interpreted to define the consensus of long-term investors. While the shorter trendline like the 50, 30, or 10 identify shorter and shorter psychological trends. The 10dma would be a primary tool in the TA of a position/day trader. Here are a few excerpts from Dr. Alexander Elder's "Trading for a Living": Moving Averages [some background] Wall Street old-timers claim that moving averages were brought into the financial markets by anti-aircraft gunners. They used moving averages to site guns on enemy planes during WW2 and applied this method to prices. The two early experts on moving averages were Richard Donchian and J.M. Hurst -- neither apparently a gunner. Donchian was a Merril Lynch employee who developed trading methods based on moving average crossovers. Hurst was an engineer who applied moving averages to stocks in his now classic book, "The Profit Magic of Stock Transaction Timing". A moving average (MA) shows the average value of data in its time window (5dma = avg price for 5 days; 20dma = avg price for 20 days; etc). When you connect each day's MA values, you create a moving average line. The value of MA depends on: values that are being averaged and the width of the MA time window. There are three main types of MA: simple, exponential, and weighted. Market Psychology Each price is a snapshot of the current mass concensus of value. A single price does not tell you whether the crowd is bullish or bearish -- just as a single photo does not tell you whether a person is an optimist or a pessimist. If, on the other hand, someone brings ten photos of a person to a lab and gets a composite picture, it will reveal that person's typical features. If you update a composite photo each day, you can monitor trends in that person's mood. A moving average is a composite photograph of the market -- it combines prices for several days. The market consists of huge crowds, and a moving average identifies the direction of mass movement. The most important message of a moving average is the direction of its slope. When it rises, it shows that the crowd is becoming more optimistic -- bullish. When it falls, it shows that the crowd is becoming more pessimistic -- bearish. When the crowd is more bullish than before, prices rise above a moving average. When the crowd is more bearish than before, prices fall below a moving average. On a final note, ASND is trading over its 200ema which is more significant than the 200dma, because the EMA is a superior trend indicator due to the fact that it adapts to change faster and allows greater weight to more current data. This way, as the 200-day window progresses forward, the oldest variables getting dropped off and replaces by different ones, doesn't cause a sudden jump/dip in the trendline because of closing prices that were "anomalies" (news releases, earnings, or macro-economic factors causing an unusual shift that day in the stock price). Style Pts.