Weekly exponential averages turn from breakout rails to resistance

A shared weekly sampling interval

During 2003 and 2004, a China-focused, a Thailand-focused, an India-focused, and a Malaysia-focused closed-end country fund can be placed on the same weekly sampling interval. Each is an exchange-listed national equity basket, so the weekly close can be read with the same price structure as a single market.

On that horizon, a 20-week exponential moving average and a 50-week exponential moving average are recency-weighted averages of ordered weekly prices. They can mark a trend rail during an advance and later a resistance band after the rail is lost.

China and Thailand lose both rails

A China-focused closed-end country fund traded below 15 early in 2003 and above 45 by autumn. Late in December 2003 it traded below its 20-week exponential moving average. In spring 2004 it traded below its 50-week exponential moving average. After those losses, both averages were treated as likely resistance.

A Thailand-focused closed-end country fund began 2003 near 4 and neared 12 in January 2004. It then repeatedly traded below its 20-week exponential moving average and later traded below its 50-week exponential moving average by spring 2004.

An India-focused breakout and later reversal

An India-focused closed-end country fund broke above both its 20-week and 50-week exponential moving averages in late spring 2003. After that breakout the fund moved from nearly 10 to almost 30 by autumn 2003, briefly returned to the 20-week exponential moving average, attempted a new high, then reversed through the 20-week average and later the 50-week average.

Editorial reading: that late-spring weekly close through both rails is a breakout, a close that turns those boundaries into a testable trend hypothesis.

A Malaysia-focused decline in the same window

A Malaysia-focused closed-end country fund advanced from just above 3.50 in spring 2003 to over 7 by autumn, then declined below 5 by spring 2004. The decline was described as at least as severe as the contemporaneous corrections in the China-, India-, and Thailand-focused funds.

From trend rail to resistance band

Across the China-, Thailand-, and India-focused funds, the 20-week exponential moving average was lost before the 50-week average. Editorial reading: losing both rails is what flips the averages from a trend rail into a common resistance lid, a support and resistance zone where a later advance is expected to stall or reverse.