# Why You Need to Watch the 200-Day Moving Average

Canonical: https://stocksurgedaily.com/why-you-need-to-watch-the-200-day-moving-average/

Using moving averages is a key part of my stock strategy.

I’ll tell you why in a moment…

But first, let’s cover the basics.

A moving average (MA) is a stock indicator that is available on almost every charting platform.

It is a dynamic line that plots the average price of a security over a given time period.

Traders typically use 50-day and 200-day MAs, but they can be set to pretty much any length of time.

The reason they are useful is that they help to smooth out the day-to-day volatility and show the general trend of a stock or index.

## **How I Use Moving Averages**

As regular readers know, the 200-day MA is my favorite [**long-term trend indicator**](https://stocksurgedaily.com/why-stock-charts-should-matter-to-you/).

I will not buy stocks trading below their 200-day average.

**Period. No exceptions.**

When a stock trades below its 200-day moving average, it represents a major violation and a clear signal that it is no longer in an uptrend.

At current levels, the major stock indexes are well above their 200-day moving averages and continue to trend higher.

But as I’ve mentioned several times over the last few months, [**stock participation is low**](https://stocksurgedaily.com/heres-what-low-market-participation-could-mean-for-stocks/).

In fact, only 39.9% of stocks are currently above their 200-day moving averages.

![](https://lh4.googleusercontent.com/E33nWAwpBbcZccer_PIyDtP6VzFumGb7w3tYoQyrCIOJke2oJ7-QN8OIGknckfcHet47YwAjAyHP6xu21NqG5mwmKg0YWLxN_8EzzdupRjJ9nrp7ktvzkL-6w4HfbAI2zq7NyZUL)

**_Percentage of Stocks Above 200-Day MA (Top) & S&P 500 Index (Bottom) -- Source: TC2000_**

So how is this possible?

How can the S&P 500 index, which most investors think of as “the market,” be approaching all-time highs, but most stocks are nowhere near highs of their own?

## **The Market Illusion**

Well, it’s simple…

The indexes are an illusion.

[**They’re wildly over-weighted by a small handful of stocks**](https://stocksurgedaily.com/are-we-headed-for-a-market-correction/) – mega-cap favorites like **Apple** (AAPL), **Amazon** (AMZN), **Tesla** (TSLA), **Microsoft** (MSFT) and **Nvidia** (NVDA).

All of these have become extremely crowded trades.

Right now, a lot of money is piling into a small group of large stocks while the rest are left to wither.

In a “good” bull market, a monkey with a dart board can find winning trades with good results in the stock market.

Of course, it’s easy when everything is going up.

But that’s not the environment right now.

## **Wait for the Right Setups**

The “smart money” players -- institutions, hedge funds, etc. -- are being selective, and the big moves are limited to a smaller number of stocks.

[**This is not a time to be overly aggressive**](https://stocksurgedaily.com/why-id-rather-date-stocks-than-marry-them/), especially if you are new to trading.

Instead, focus on finding good setups with signs of institutional buying.

Then, wait for a low-risk entry point.

This is what I try to do here every week at **_Stock Surge Daily_**.

But if you're unsure of how to best take advantage of my weekly trades or how to determine the best entry points...

Check out my recent article, [**How to Follow My Weekly Trades**](https://stocksurgedaily.com/how-to-follow-my-weekly-trades/).

Embrace the surge,

![](https://lh4.googleusercontent.com/bQzMYssXW3CuguDKw3qJanL1ZMxg2XoozMG272kgcGrXSRa85_MWB1e4wL0zKP7viEFyGSSavsn0ZuM486_jw9oqnt5dxwHCEynBvz8ebydSjn3vzufEzyzY4vgMjG_tQIv69O-C)

Ross Givens

Editor, **_Stock Surge Daily_**