Using the same chart of GE, all I am going to do now is identify a recent support level:
As you can see, in the early part of 2005, the $35 area was strong support. We also see some overhead resistance that stopped the rally in May 2005. Now watch how this signal works out, we see the stock break below $35, next we see the 50dma cross under the 100dma. What followed was a continued drop to $33. If you were a trader, you would have exited the stock at $35 and saved yourself that drop.
Not indicated on that chart is that the $33 area is a support level. Can you see why?
You could have used $33 as a re-entry into the stock.
