Moving averages may well be the most important technical tool a trader can use. A variety of time-length selections can offer specific clues to the underlying stock's strength or weakness in addition to key entry & exit points as well.

The most popular lengths for investors and traders are 200 day MA and 50 day MA. These key measures of underlying movement are what the masses focus on, which is important for us to be aware of. Markets trading at or above each mark with both MA rising are considered strong uptrends. Equities trading below these important benchmarks with one or both averages flat or declining signals caution for the bulls.

(Daily chart of Cisco with 50 - 200 DMA)

Steady incline for both 50 an 200 DMA here in CSCO mirrored price ascent. However, The intraday violation of 50 DMA in early April sounds a warning to tighten stops or stand aside.

As you can see in these two examples we have stocks exhibiting strength and weakness based on their long-term moving averages. This gives us the top-down view necessary to gauge a stock's "temperature".

The last example shows how strong support may develop when both 50 and 200 day moving averages meet. This area is often tested over a period of sessions before price direction resumes or reverses. Aggressive traders may take positions while conservative traders wait for new breakout confirmed with other tools before entering the market.

50 and 200 day moving averages offer resistance or support to the underlying equity, giving us a place to begin when planning our trades. Short-term moving averages and other technical tools can then be applied to markets that pass our initial test for strength.