Using Smoothed Moving Average Distances to Read Trend Support and Resistance

Summary

This indicator simplifies a moving average chart into the percentage distances between a smoothed closing price and two exponential moving averages. The example uses a shorter and a longer average, with a separate line showing their relative spread. The author uses it for trend following: when a distance approaches zero and turns, the corresponding average may be acting as support at a local low or resistance at a local high. The longer average's position relative to the shorter one gives a broad trend reading and shows their crossings.

Smoothing is intended to reduce noisy signals and make apparent average bounces easier to interpret than raw closing prices. The indicator marks local peaks and troughs in each distance series. The author presents it as a clearer view of price and averages, not as a predictor, and acknowledges that it duplicates information available on a chart with moving averages. No backtest or quantified evidence is given; the examples and default settings are an individual approach, and the suggested bounce behavior is not shown to be reliable across markets.

Key ideas

• The indicator tracks the smoothed price's percentage distance from two exponential moving averages.
• A turn near zero is interpreted as a possible bounce from the corresponding average.
• The spread between the averages provides a simple view of longer-term trend and crossings.
• Smoothing is intended to reduce noisy signals compared with using closing price directly.
• The author offers no backtest evidence and notes that the display duplicates charted moving averages.

Tags

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