Moving Average Analysis of MSFT

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From the Weekend Report 6/26/2009: The week revealed MSFT to still be above the 200 bar average, but the space between the price and the average line is narrowing.

Recent Averages with Candlestick Chart. of MicroSoft

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Different ways of averaging are tested on MSFT stock prices for their ability to predict trend movements. Techniques available include moving weighted or exponential averages of various periods and the family of MACD (Moving Average Convergence Divergence) indicators.

Unfortunately, some of the most popular indicators of this type can prove to be the worst forcasting indicators. The effectiveness of these methods as applied to MSFT stock price trend evaluation is tested on the next page.

Green is the 20 bar moving average, while the 200 session average is red. Often the simple unweighted moving averages seen in this plot will give a more accurate indicator, with fewer false signals than some of the supposedly more sophisticated techniques that we test below. It is always possible to fine tune an exponential or other weighted average so that it seems to outperform a simple average in a given situation. However, over-tuning can increase false and misleading indicators. A good un-ambiguous signal will be noticable through a variety of averaging methods, including some of the most simple.

	Companies In the News
	In the news, Wednesday, July 01, 2009: An unfavorable condition has developed with Lexmark International, Inc., ticker symbol LXK. Also, there are breaking events concerning Lennar Corporation (LEN) and The Travelers Companies, Inc. (TRV)

MACD analysis would appear perfect for overtuning, since it may use any of an infinite number of averaging methods and coefficients. In addition to crossover signals from various moving averages, analysts frequently add a trigger line based on some average of the first two averages. Here we depict the results of 12 and 26 session Exponential Moving Averages. The exponential coefficient used here is .18. There is nothing magic about these parameters, but these are frequently seen.

Float the cursor for a longer term chart.

Moving Average Convergence Divergence, or MACD, produces buy or sell signal that are color tinted here.

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Moving Avg. 20/200 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 23 instances
Future30SesAvgClose	2.24 % minus 1.87 % = 0.37 %	3.12 %
Future5SesAvgClose	0.21 % minus 0.36 % = -0.16 %	-7.97 %
Future2SesAvgClose	0.35 % minus 0.19 % = 0.17 %	21.01 %
Sell Signals - 22 instances
Future30SesAvgClose	2.75 % minus 1.87 % = 0.88 %	7.42 %
Future5SesAvgClose	1.27 % minus 0.36 % = 0.90 %	45.89 %
Future2SesAvgClose	0.93 % minus 0.19 % = 0.75 %	94.74 %
	.
Moving Avg. 5/20 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 163 instances
Future30SesAvgClose	1.78 % minus 1.87 % = -0.09 %	-0.74 %
Future5SesAvgClose	0.24 % minus 0.36 % = -0.12 %	-6.10 %
Future2SesAvgClose	0.18 % minus 0.19 % = -0.01 %	-0.95 %
Sell Signals - 163 instances
Future30SesAvgClose	2.09 % minus 1.87 % = 0.22 %	1.84 %
Future5SesAvgClose	0.00 % minus 0.36 % = -0.36 %	-18.44 %
Future2SesAvgClose	0.04 % minus 0.19 % = -0.15 %	-18.83 %
	.
Moving Avg. 5/200 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 39 instances
Future30SesAvgClose	2.48 % minus 1.87 % = 0.60 %	5.11 %
Future5SesAvgClose	1.22 % minus 0.36 % = 0.85 %	43.40 %
Future2SesAvgClose	0.78 % minus 0.19 % = 0.59 %	74.64 %
Sell Signals - 38 instances
Future30SesAvgClose	1.95 % minus 1.87 % = 0.07 %	0.63 %
Future5SesAvgClose	-0.09 % minus 0.36 % = -0.46 %	-23.30 %
Future2SesAvgClose	-0.13 % minus 0.19 % = -0.32 %	-40.61 %
	.
MACD 12/26 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 550 instances
Future30SesAvgClose	1.89 % minus 1.87 % = 0.02 %	0.18 %
Future5SesAvgClose	0.38 % minus 0.36 % = 0.02 %	0.88 %
Future2SesAvgClose	0.26 % minus 0.19 % = 0.07 %	9.45 %
Sell Signals - 550 instances
Future30SesAvgClose	2.09 % minus 1.87 % = 0.22 %	1.86 %
Future5SesAvgClose	0.58 % minus 0.36 % = 0.22 %	10.97 %
Future2SesAvgClose	0.36 % minus 0.19 % = 0.17 %	22.16 %
	.
MACD 12/26 Signal	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 755 instances
Future30SesAvgClose	2.25 % minus 1.87 % = 0.38 %	3.23 %
Future5SesAvgClose	0.59 % minus 0.36 % = 0.23 %	11.64 %
Future2SesAvgClose	0.41 % minus 0.19 % = 0.22 %	27.69 %
Sell Signals - 755 instances
Future30SesAvgClose	1.83 % minus 1.87 % = -0.04 %	-0.32 %
Future5SesAvgClose	0.23 % minus 0.36 % = -0.14 %	-7.01 %
Future2SesAvgClose	0.08 % minus 0.19 % = -0.10 %	-13.11 %
	.
Calibrated M by Q Half Cycle Moving Avg.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 319 instances
Future30SesAvgClose	1.27 % minus 1.87 % = -0.60 %	-5.12 %
Future5SesAvgClose	0.00 % minus 0.36 % = -0.37 %	-18.57 %
Future2SesAvgClose	-0.14 % minus 0.19 % = -0.33 %	-41.35 %
Sell Signals - 317 instances
Future30SesAvgClose	1.39 % minus 1.87 % = -0.48 %	-4.04 %
Future5SesAvgClose	0.19 % minus 0.36 % = -0.18 %	-9.05 %
Future2SesAvgClose	0.02 % minus 0.19 % = -0.17 %	-21.15 %
	.
Calibrated M by Q Full Cycle Moving Avg.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 186 instances
Future30SesAvgClose	1.08 % minus 1.87 % = -0.79 %	-6.72 %
Future5SesAvgClose	0.14 % minus 0.36 % = -0.22 %	-11.39 %
Future2SesAvgClose	0.18 % minus 0.19 % = -0.01 %	-0.78 %
Sell Signals - 186 instances
Future30SesAvgClose	0.96 % minus 1.87 % = -0.91 %	-7.73 %
Future5SesAvgClose	-0.14 % minus 0.36 % = -0.51 %	-25.82 %
Future2SesAvgClose	-0.18 % minus 0.19 % = -0.37 %	-46.97 %
	.
Projected Crossing of SMA 20/200.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 36 instances
Future30SesAvgClose	3.11 % minus 1.87 % = 1.24 %	10.50 %
Future5SesAvgClose	1.66 % minus 0.36 % = 1.29 %	65.70 %
Future2SesAvgClose	1.12 % minus 0.19 % = 0.93 %	118.36 %
Sell Signals - 24 instances
Future30SesAvgClose	2.41 % minus 1.87 % = 0.54 %	4.53 %
Future5SesAvgClose	0.50 % minus 0.36 % = 0.13 %	6.78 %
Future2SesAvgClose	0.24 % minus 0.19 % = 0.05 %	6.61 %
	.
Projected Crossing of SMA 5/20.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 217 instances
Future30SesAvgClose	1.50 % minus 1.87 % = -0.37 %	-3.16 %
Future5SesAvgClose	0.48 % minus 0.36 % = 0.12 %	5.87 %
Future2SesAvgClose	0.33 % minus 0.19 % = 0.14 %	17.99 %
Sell Signals - 166 instances
Future30SesAvgClose	1.31 % minus 1.87 % = -0.56 %	-4.75 %
Future5SesAvgClose	0.04 % minus 0.36 % = -0.32 %	-16.35 %
Future2SesAvgClose	0.11 % minus 0.19 % = -0.08 %	-10.35 %
	.

The best buy signal for 30 future sessions was 1.24 % from the Projected Crossing of SMA 20/200.,and the best sell signal for was -0.91 % from the Calibrated M by Q Full Cycle Moving Avg..

For 5 future sessions the best buy signal was 1.29 % from the Projected Crossing of SMA 20/200.,and the best sell signal was -0.51 % from the Calibrated M by Q Full Cycle Moving Avg..

The best buy signal for 2 future sessions was 0.93 % from the Projected Crossing of SMA 20/200.,and the best sell signal was -0.37 % from the Calibrated M by Q Full Cycle Moving Avg..

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