Using Moving Averages to Find Winning Stocks

Moving averages would fall under the heading of technical analysis. But you don’t have to be a technician to use them. They're pretty plain and simple and very straight forward.

With the market in a larger downtrend and the recent price action going back and forth lately – it can sometimes be pretty difficult to determine what a stock's current trend is.

And in these times, I think it's important to look at some key measurements -- one of which is the moving average.

Long-Term and Short-Term Moving Averages

Short-term moving averages help gauge the short-term direction of the market, while longer moving averages take a bigger-picture view.

An example of a long-term moving average would be the 200-day moving.

For example: if a stock breaks the 200-day moving average on its way down, that's generally thought to be bearish, and a sign that the longer term trend could be reversing.

Tons of stocks did this in 2008.

The 200-day moving average can also act as support. If a stock comes down, but stops at the major moving average and then starts moving higher from there, it can act as a firm underpinning of support for the stock. Kind of like a moving trendline.

And just as breaking the 200 day moving average on the way down can often signal a downtrend, an upside breakout thru the 200-day moving average can often signal the beginning of a new uptrend for a stock.

The 50-day moving average can be quite useful as well. It's more of an intermediate snapshot of the price trend and is more sensitive than the longer-term 200 day.

A rising moving average with the price trading above it is bullish, while a descending moving average with the price trading below it is bearish.

And shorter-term signals can be seen with the 10- and 20-day moving averages.

Also, moving average crossovers can be valuable too. When the quicker moving average (10-day for example) is above the slower moving average (20-day), this is thought to be bullish. Likewise, when the shorter term is trading below the longer term moving average, this is thought to be bearish.

Finding these kinds of stocks is easy when you use a stock screener.

Of course, moving averages alone don't tell the whole story. But a company with solid fundamentals while also trading above these momentum indicators can help you find stocks bucking a downtrend or confirming a new uptrend, and, therefore, find resilient winners.

The screen that I'm running today looks for stocks trading above their short-term moving averages (10- and 20-day), intermediate-term moving average (50-day) and long-term moving average (200-day). They also have to have a Zacks #1 Rank or Zacks #2 Rank (which is a Strong Buy or a Buy, respectively) and have positive forward looking growth rates.

Here are 5 stocks from this week's screen:

AVAV - Snapshot Report AeroVironment, Inc.
CPLA - Analyst Report Capella Education Company
BJRI - Analyst Report BJ’s Restaurants, Inc.
GMCR - Analyst Report Green Mountain Coffee Roasters, Inc.
MDVN - Analyst Report Medivation, Inc.

Get the rest of the stocks on this list and start finding stocks above (or below) their moving averages on your own. It's easy to do. Click here to sign up for a free trial to the Research Wizard today:

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.