If you notice, Nifty50 gave a breakout once it crossed 50 day moving average after taking support at 200 day moving averages. The price of the index has taken support and resistance at every moving average and a break on either side has resulted in a breakdown or breakout. Let us understand this in a more simplified chartĬonsider multiple Moving average for Nifty50, Whenever the price is below the moving average, the moving average acts as a resistance and whenever the price is above the moving average it will as act as a support. Let us understand this by example, we will be using 50, 100 and 200 day simple moving averages for now. The moving averages are mainly used to determine support and resistance by the analyst.
While calculating this number we are mainly moving to the latest data point hence the name “moving” average If you notice the average on 3 nd February 2023 and 6 th February are different. Going ahead the next 5 day average for Nifty50 will be taken from the next trading session i.e to Hence the moving average of Nifty50 in last 5 session is 17,736.21 Let us consider and calculate the moving average of last 5 days of Nifty50 For example, a 20day simple moving average is nothing but the arithmetic mean of the 20 day closing price of the stock, similarly for 50day, 100 day and 200 day respectively.
To calculate the moving averages, we take the average of the closing price for those number of days. The most used simple moving average is the 20day, 50day, 100day and 200day moving average respectively The moving averages helps to eliminate the noise and gives a smooth data set for an analyst to take better trade decision.
The price of a stock often fluctuates and can create a lot of noise for an analyst. The moving average is one of the oldest tools used by technical analysts.
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