In technical analysis, what does a Moving Average indicate about price extremes?

• A. It is an indicator of market trends
• B. It is an indicator of price extremes
• C. It suggests future stock splits
• D. It helps in historical performance analysis

Answer: (A)

A moving average smooths price data over a set period to reveal the overall direction of price movement. Because it reflects the average of past prices, it shows the prevailing trend rather than pinpointing extreme highs or lows. When prices stay above the moving average, the trend tends to be upward; when they stay below, the trend tends to be downward. Shorter-period averages track shorter-term movement, while longer-period averages show the longer-term trend, and crossovers with price or other averages can signal changes in trend. It isn’t a measure of price extremes, nor is it a tool for predicting stock splits or solely for assessing historical performance.