Let’s examine how to identify trend reversals using Guppy moving averages.
The crossover of the short- and long-term moving averages represents trend reversals.
If the short-term EMAs cross ABOVE the long-term moving averages, this is a bullish crossover.
The bullish crossover indicates that a bullish reversal has occurred.
If the short-term EMAs cross BELOW the longer-term ones, this is a bearish crossover.
The bearish crossover suggests a bearish reversal is occurring.
When the moving averages between the two groups are close together and approximately parallel.
This demonstrates that the shis ort-term market sentiment and long-term trend are largely in agreement.
When both groups of EMAs are moving horizontally, or mostly moving sideways and heavily intertwined, it means the price lacks a trend.
In the chart above, see how when the red and blue groups of EMAs are intertwined.
The price is directionless, simply moving up and down within a range.
This current price action is more suitable for range trading.
As a trend trader, it would make sense to sit out and wait for better conditions.
When the market is sideways, trend traders sit on the sidelines.
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