The 30 day moving average is the average of what the stock price has been as can be referred to as a “home” position. This home position forms a natural support or resistance line for the stock. An example of this can be seen below.

Remembering the trampoline analogy, the share price bounces off the “home” position. It forms a support level for the stock and the price rarely penetrates down through this level while in the uptrend.

Traders are creatures of habit and this gives a repetitive and recognisable pattern you can use to your advantage. For several stocks, the amount of a “bounce” off the 30 day moving average will be the same as the last. To illustrate this, take 3 price movements within a few months from this chart –

Move #1 – 19% from moving average cross to peak price.

Move #2 – 14% from moving average cross to price peak.

Move #3 – 15% from moving average cross to price peak.

By referring to past history for this company, it is possible to develop a price target for the next movement.
In IntegraStock, we use a 30 day moving average. However not every stock will conform to this exact average. The ideal average for finding the support or resistance line may be anywhere from a 20 to a 40 day moving average depending on the company and its business cycle. You can turn on 3 moving averages in the charts and adjust these from stock to stock as you please to get the best fit. Alternatively you can leave it at 30 days and this will still give you strong guidance.