200-Day Moving Average Chart: How to Read the Line

Add up the last 200 daily closes and divide by 200. Plot that number at today’s date, then do it again tomorrow with the oldest close swapped for the newest. The line you get is the 200-day moving average, the slowest line most traders keep on a daily chart.

Reading it takes two looks. First, where is price: above the line or below it, and by how far? Second, which way is the line pointing? Price above a rising 200-day describes a stock in a long uptrend and price below a falling one describes the opposite, while the mixed cases (price above a flat or sinking line, or below a climbing one) are where most misreadings happen, usually because someone answered the first question and never asked the second.

Put the line on a daily chart

Open the indicator menu and find the moving average. It may be listed as MA or SMA. Set the length to 200. Set the source to close. Leave the offset at zero, since a shifted line plots each value several bars away from the closes it was built from and makes every touch look earlier or later than it really was.

Then check the interval. Indicators count bars, whatever the bars are, so a length of 200 on an hourly chart spans only a few weeks of trading and the same 200 on a weekly chart spans years. The 200-day is a daily-bar line.

Check the price series too. An unadjusted 2-for-1 split halves every close after the split date, and for the next 200 sessions the average blends pre-split and post-split prices into a level the stock never traded at. Turn split adjustment on.

History matters as well. A stock that listed fewer than 200 sessions ago has no full window yet, and charting tools handle that gap in different ways. Load at least a year of daily bars so the line’s recent path is on screen.

Read price against the line

Above means the latest close is higher than the mean of the last 200 closes. Two hundred sessions is 40 trading weeks, a little over nine months, so a stock above its 200-day trades higher than where it has spent most of that stretch on average. Below means the reverse.

How far matters as much as which side. A stock 3% above the line and one 30% above it are both technically above it, and they call for very different handling, which is the subject of how far above the 200-day counts as stretched. Quote pages often turn the gap into a single percent figure, and the 50-day and 200-day moving averages work one through alongside the shorter line.

Traders also watch how price behaves near the line. Pullbacks in an uptrend sometimes stall around the 200-day. Rallies in a downtrend sometimes stall just under it. Treat it as a zone.

When price does cross, look at the bar underneath the crossing session, because a close through the 200-day on volume well above the stock’s own average shows more participation than a quiet drift across the line, and a quiet drift is easy to undo the following week.

Read the slope

Price against the line is half the reading. The slope is the rest. Hover over the line today and again at a date about a month back, and compare the two values.

A flat 200-day under a price sitting above it says the stock went mostly sideways for much of a year and has only lately lifted. That’s a thinner case than the same gap above a line that has climbed for months.

Why the line can fall while price holds flat

Each day a simple moving average changes because of exactly two closes. One comes in. One drops out. Every close in between stays in the sum, so the daily change is the new close minus the close from 200 sessions ago, divided by 200.

Price did nothing on day 6. The average fell two points anyway, because a high close aged out of the window. Scale it up.

Price sits 10% above the average in both versions. In one the line ticks down and in the other it ticks up, and the difference comes entirely from what the stock did about nine months earlier.

That gives you a way to see the slope coming. Scroll back 200 sessions from today and look at the closes about to leave the window: if the stock spiked back then, the 200-day will sag over the next few weeks as those high closes roll off, even with today’s price holding firm, so a flattening line that looks like fresh weakness may be nothing more than an old rally dropping out of the sum. If the stock was in a slump 200 sessions ago, the line will climb for a while as long as current closes stay above those old lows.

Simple or exponential

An exponential moving average has no window. Nothing drops out. Each day it moves a fixed fraction of the way from yesterday’s value toward today’s close, and for a 200-period EMA that fraction is 2 ÷ (200 + 1).

On the day the SMA in the first case lost a nickel, the EMA gained one. An EMA rises whenever the close is above it and falls whenever the close is below it, so its slope always agrees with which side of it price is on. Old closes fade out gradually. The trade-off is speed: after a sharp drop the EMA turns down sooner than the SMA, and on a jumpy stock it turns back and forth more often.

Quote pages that print a 200-day figure generally mean the simple version. Charts let you choose. If your line and the quote page disagree, check the average type first and the adjustment setting second. Then pick one type and keep it, because switching changes every touch, cross and distance you have already marked.

The 40-week line on a weekly chart

A weekly chart draws one bar per week. Set a 200-period average there and it covers years.

The weekly counterpart of the 200-day is the 40-week average. The two track each other closely without matching, since the weekly version averages only the last close of each week, skipping the other sessions, and a week shortened by an exchange holiday still counts as one full bar. Expect it near the 200-day and smoother. Some long-term investors prefer it because it updates once a week, which matches how often they check.

The 50-day crossing the 200-day

Add a 50-day line and the two will cross from time to time. The 50-day rising through the 200-day gets called a golden cross, and the reverse a death cross. Both are built entirely from past closes, and the 200-day is the slowest line on the chart, so by the time a cross prints, price has usually been heading that way for weeks. Read a cross as a summary of the trend so far.

Where readings go wrong

• A length of 200 applied on the wrong interval.
• An adjusted chart compared with an unadjusted quote page.
• Price above the line read as strength while the line itself falls.
• A sag in the line taken as new weakness when an old spike is simply dropping out.
• The line treated as an exact price when it behaves like a zone.

If you follow a list of stocks, a column for price versus the 200-day on your watchlist does the first look for you each morning, and the chart can handle the second.