Screening Stocks for Five Converging Moving Averages

Summary

This note describes a simple stock screen built around the 5-, 10-, 20-, 30-, and 60-day moving averages converging. It interprets convergence as a period of price balance that may precede a change in direction, and proposes using the signal to identify potential opportunities. The article gives no backtest, performance figures, or empirical support for that interpretation.

The author notes that the signal can be slow and may miss short-term opportunities, and that moving averages can become less reliable during sharp price swings. Political, economic, and natural events may also affect prices in ways the screen cannot anticipate. Suggested extensions include adding longer moving averages or indicators such as MACD, RSI, and Bollinger Bands, then reassessing the rules as conditions change. The note does not specify a precise tolerance for what counts as averages converging, nor does it define entry, exit, or risk controls.

Key ideas

• The screen looks for stocks whose 5-, 10-, 20-, 30-, and 60-day moving averages converge.
• The article treats convergence as a possible sign of market balance or an approaching trend change.
• Sharp price moves can reduce the usefulness of moving-average signals.
• The note suggests combining the screen with other indicators and periodically reviewing its rules.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.