In trend analysis, what does a moving average often serve as?

In trend analysis, a moving average functions as a level of support or resistance. As the moving average smooths out price data over a specific period, it provides a clearer view of the underlying trend by filtering out noise from price fluctuations.

When the price approaches a moving average from above, it often finds support at that level, as traders may see this as an opportunity to buy in anticipation that the price will continue rising. Conversely, if the price approaches the moving average from below, it may encounter resistance, as traders could see this as a sell signal, expecting the price to reverse direction.

The dynamic nature of moving averages—adjusting as new price data comes in—means they can adapt to changing market conditions, making them useful indicators for identifying potential levels where price reactions may occur. This characteristic is essential for traders who want to anticipate price behavior based on established trend patterns.