Moving averages are very important to look at when analyzing charts. I look to focus on the 21 day, 50 day and 200 day Exponential Moving Averages (EMA) for stocks and the markets. These averages usually provide good support levels for both stocks and the markets. When a stock is in a favorable up trend it usually will remain at or above its 21 day EMA. If an up trending stock breaks below the 21 day EMA there is a good chance it will drop back to its 50 day E MA. Meanwhile if the stock breaks below its 50 day EMA there is a good chance that it may fall back to its 200 day E MA. Some examples are shown below.
SUNW is a good example of a stock that has remained above its 21 day EMA (blue line) for several months. Notice when SUNW pulled back in early October it still remained near its 21 day EMA (a very bullish sign).
QCOM has been another strong stock and although it has broken its 21 day EMA (blue line) over the past several months. Also it has always found support at its 50 day EMA (purple line) and rallied to new highs each time it tested this support level.
RNWK was a strong internet stock back in the early Spring of 1999 when it rocketed from $60 to $130 in only two weeks (Points A to B). Notice how it made a Parabolic Move with a Climax Top (remember the chart sell signals) and then sold-off very quickly going from $130 back to $65 a share in 5 trading days. Also notice that once it penetrated the 21 day EMA (red line) that it fell back to its 50 day EMA (blue line). It then bounced off the 50 day EMA (Point C) and rallied briefly in late April (points C to D) but sold-off in May and eventually retreated all the way back to its 200 day EMA (purple line) by mid-June (point E).