Friday, April 19, 2013

¡No Pasarán! The significant 200

The Battle of Thermopylae is famous in folklore for the exploits of 300 Spartans in holding back vastly superior numbers of an enemy army that was invading Greece.

It now seems there exists a major blocking device in trading, which is designated on this occasion by the number 200. This is the Simple Moving Average that contains that number as its divisor. It seems it is particularly significant on the daily charts, but it is honoured in all time frames.

Below is the behavior of EURUSD on the monthly chart going back several years.

The points of contact with the 200 SMA are obvious but even where price goes through the moving average, it hesitates noticeably before making the breakthrough.

This is the daily chart of the same currency pair...

...and once again it can be seen that traders with power to move the markets, or the computers that they supervise, have considerable respect for this indicator.

In recent times this phenomenon has been marked. For each of the past 10 trading days up to today, Friday April 19th 2013, the rate on the EURUSD has straddled the 200 day Simple Moving Average. When traders cannot make up their minds as to direction, they come to rest at the 200 day SMA.. (Click on the highlighted to tweet it).

Click on the images to enlarge them in HD

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