All stacked up

07/09/19
  • Stacked moving averages point to a stock that has been trending upward
  • Detecting stacks early on can be eye-catching to some traders

When a stock is in an uptrend, the moving averages on a chart will be rising, and be “stacked,” with the fastest on top and the slowest on bottom. It’s a great way to get a read on how a stock has been trending. 

Take Consolidated Energy (ED), a member of the utility sector, which has lately seen quite a bit of interest from traders amid slowing growth concerns and a rotation into sectors that are traditionally viewed as defensive. 

In the chart below the fastest MA (10-day, white) is above the 50-day in blue, and the 200-day below. The yellow vertical line marks the day that the 10-day crossed above the 50-day, setting up the moving average stack, and the solid up trend that has been in place for five months. 

Consolidated Edison, 7/08/17–7/08/19

Source: Power E*TRADE


With a five-month trend already in place, some traders may wish to look for the stack sooner in the trend. Masco (MAS) may be just such a situation.

Masco is in the construction materials industry and is a major part of the supply chain with a product list that includes faucets, showers, and toilets;  architectural coatings, including paints, primers, specialty paints, stains and waterproofing products; and cabinetry for kitchen, bath, storage, home office and home entertainment. Their products are sold in home retailers and to wholesalers and distributors. The stock is inherently connected to home construction and improvement.

The 10-day moving average crossed up through the 50-day in late June, and the moving averages are in an uptrend defined by the 10-50-200 stack up. So MAS is in an uptrend. What about some related stocks?

Masco Corporation (MAS), 4/11/19–7/08/19

Source: Power E*TRADE


One of the major builders is D.R. Horton (DHI), a stock that fell over 40% in 2018 as home builders disappointed investors. Part of the DHI story is the “starter home” market for new construction, and it seems that the millennial generation continues to prefer to rent with roommates.

D.R. Horton (DHI), 4/09/19–7/08/19.

Source: Power E*TRADE


If the DHI 10-day moving average can rise through the 50-day, it will stack the moving averages, potentially signaling the start of an uptrend in this important home builder.

Of course one could point out that the stock is also up near likely resistance around 47, so that would be a crucial area to watch.

And any trade should be weighed for its potential gain and loss, which means being disciplined and stopping out on trades that go wrong.

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