SMA20
20-day moving average
💡 What is SMA20? - The 20-Day Average "Temperature" of a Stock
SMA20 stands for Simple Moving Average 20. It's the average of the closing prices from the most recent 20 trading days (about one month). Think of it like the stock's "average temperature" over the past month. Just as a normal body temperature of 98.6°F helps us judge if someone has a fever, if the current price is above SMA20, the short-term trend is bullish; if below, it's bearish.
Key Terms in Korean and English
SMA (Simple Moving Average) | 20-Day Moving Average | Support | Resistance | Crossover | Trend | Price Above SMA | Price Below SMA | Golden Cross | Death Cross
On screeners like Finviz, the SMA20 value usually shows how many percent (%) the current price is above or below the SMA20. For example, an SMA20 of "+5.2%" means the current price is 5.2% above the 20-day moving average, while "-3.1%" means it's 3.1% below. A positive (+) value suggests a short-term uptrend, and a negative (-) value suggests a short-term downtrend.
Moving averages are the most fundamental tool in technical analysis. The 20-day moving average reflects about one month (4 weeks) of short-term trend, making it especially important for swing traders (those who hold positions for days to weeks). Since 20 days roughly matches the number of trading days in a month, it reflects the average investor sentiment of the past month.
📐 How to Calculate SMA20
Basic Formula
SMA20 = (Day1 Close + Day2 Close + ... + Day20 Close) / 20
Just add up the closing prices of the most recent 20 trading days and divide by 20. Each day, a new closing price is added and the one from 21 days ago drops off, so the SMA20 value changes daily. It's the simplest yet effective calculation method.
Distance from SMA20 (%)
SMA20 Gap (%) = (Current Price - SMA20) / SMA20 × 100
For example, if Apple (AAPL) is currently at $185 and its SMA20 is $175, then the gap = (185-175)/175 × 100 = +5.71%. The SMA20 value you see on Finviz is exactly this gap percentage.
SMA vs EMA Difference
SMA (Simple Moving Average) gives equal weight to all closing prices, while EMA (Exponential Moving Average) gives greater weight to more recent data. EMA20 reacts faster to recent price changes than SMA20. EMA is often better for short-term trading, while SMA is better for medium-term trend analysis. Finviz's SMA20 is, as the name implies, a simple moving average.
📊 How to Interpret SMA20
Strong Uptrend: +10% or more above SMA20
When a stock is more than 10% above its 20-day average, it means the short-term momentum is very strong. For example, Nvidia (NVDA) reached +15% to +20% above its SMA20 during the AI rally. When the price stretches this far from its moving average, it may be overheated in the short term and a pullback toward the average could occur. Rather than buying new positions, it's better to hold existing ones.
Healthy Uptrend: +2% to +10% above SMA20
This is a healthy state where the price maintains a reasonable distance above the SMA20 while trending up. Large-cap quality stocks like Microsoft (MSFT) and Amazon (AMZN) often fall in this range during stable uptrends. If the price repeatedly bounces near the SMA20 during pullbacks, that's a very healthy trend.
Neutral: -2% to +2% from SMA20
When the price hovers around the SMA20, it suggests a sideways movement with no clear direction. A direction may be chosen soon, so it's best to wait for a breakout before entering. If trading volume is decreasing in this state, a big move could come soon.
Bearish: -5% or more below SMA20
If the price is more than 5% below the SMA20, the short-term downtrend is clearly established. Especially if the SMA20 itself is sloping downward, the downtrend is even stronger. Trying to catch a falling knife (counter-trend buying) in this situation is risky; it's safer to wait on the sidelines until a trend reversal signal is confirmed. A bounce can happen even when the price is more than -10% below, but be aware that oversold bounces and genuine trend reversals are different things.
🔄 Comparison with Similar Indicators
SMA20 vs SMA50
SMA20 reflects about 1 month of trend, while SMA50 reflects about 2.5 months. SMA20 reacts faster and suits short-term trading, while SMA50 is better for medium-term trend assessment. When SMA20 crosses above SMA50, the short-term trend is starting to lead the medium-term trend, signaling strengthening upward momentum. A downward cross signals weakening momentum.
SMA20 vs SMA200
SMA200 reflects about 10 months (nearly a year) of long-term trend. If the price is above SMA200, it's considered a long-term uptrend; below, a long-term downtrend. Looking at SMA20 and SMA200 together lets you gauge both short and long-term trends at once. Price above both = healthiest state; above SMA200 but below SMA20 = short-term pullback in a long-term uptrend; below both = full-fledged downtrend.
SMA20 vs Bollinger Bands
The middle line of Bollinger Bands is exactly the SMA20. Bollinger Bands are created by adding and subtracting a standard deviation from the SMA20 to form upper and lower bands. Using SMA20 alone shows you the trend, while combining it with Bollinger Bands also reveals volatility. In a sense, using Bollinger Bands means you're automatically looking at the SMA20 too.
🎯 Practical Strategies
Strategy 1: SMA20 Support Buy (Pull-back Strategy)
Buy when a stock in an uptrend pulls back to the SMA20 and bounces. This is one of the most basic and effective strategies. For example, if Apple (AAPL) has been steadily rising and temporarily weakens to the SMA20, buying at that point lets you get a good stock at a lower-than-average price. The key is to enter after confirming the bounce off the SMA20. If it breaks below SMA20, cut your loss.
Strategy 2: Moving Average Crossover Strategy
A simple strategy: buy when the price crosses above SMA20, sell when it crosses below. It works well on stocks with clear trends, such as momentum stocks like Tesla (TSLA) or Nvidia (NVDA). The downside is many false signals in sideways markets. Adding a condition like "hold above/below for 2 consecutive closes after the cross" can reduce noise.
Strategy 3: Screening Filter
When screening stocks, you can use filters like "stocks above SMA20" or "stocks 0% to +5% above SMA20" to find those in a short-term uptrend but not yet overheated. Applying the SMA20 filter on Finviz lets you quickly sift through thousands of stocks to find matches.
Strategy 4: Reading Trend Strength via SMA20 Slope
The direction (slope) of the SMA20 itself is also important information. An SMA20 sloping upward means a short-term uptrend; flat means sideways; downward sloping means a downtrend. The steeper the slope, the stronger the trend. When the SMA20 slope starts to shift from positive to zero, it's an early warning that the uptrend is weakening. Watching SMA20 slope changes in large-cap stocks like Amazon (AMZN) can help you spot trend reversals early.
🏭 SMA20 Characteristics by Sector
Tech Stocks
Tech stocks tend to show large gaps from their SMA20. Momentum stocks like Nvidia (NVDA) or Tesla (TSLA) can easily run +15% or more above the SMA20, or fall -10% or more below. The SMA20 itself moves quickly, so trading signals occur frequently.
Dividend Aristocrats
Dividend aristocrats like Coca-Cola (KO) and Procter & Gamble (PG) show smaller gaps from their SMA20, usually moving within -3% to +3%. For these stocks, dropping to -3% or more below the SMA20 may actually be a good buying opportunity.
Energy / Commodities
The direction of the SMA20 can change abruptly based on oil or commodity prices. When using SMA20 with energy stocks like ExxonMobil (XOM) or Chevron (CVX), you should also check the trend in oil prices.
⚠️ Cautions When Using SMA20
1. It's a lagging indicator: Since SMA20 uses the past 20 days of data, it's inherently lagging. The SMA20 rises only after the price has already risen, and falls only after the price has already fallen. It's not suitable for pinpointing exact tops or bottoms.
2. Many false signals in sideways markets: When the price moves sideways without direction, it crosses above and below the SMA20 repeatedly, creating many false signals. It's best to avoid the SMA20 crossover strategy during sideways markets.
3. Distortion from gaps: When large gaps occur after earnings releases, the SMA20 changes sharply. Even if the price suddenly jumps above the SMA20 via a gap up, additional confirmation is needed to know if it's a sustainable rise.
4. Don't apply the same standard to every stock: It's normal for volatile stocks to have wide gaps from the SMA20, and for stable stocks to have narrow gaps. You need to consider the characteristics of the sector and the individual stock.
5. Don't use it as a standalone decision tool: The SMA20 is only the first step of trend confirmation. Buy/sell decisions should be made after considering volume, other technical indicators (RSI, MACD, etc.), and fundamentals together.
✅ SMA20 Usage Checklist
☑ Have I checked whether the current price is above or below the SMA20?
☑ Have I checked the gap (%) from the SMA20?
☑ Have I checked the slope (direction) of the SMA20?
☑ Have I also checked the relationship with SMA50 and SMA200?
☑ Have I determined whether the market is trending or sideways?
☑ Have I checked whether the SMA20 has historically acted as support/resistance?
☑ Does the volume support the SMA20 break/breakdown?
☑ Do other technical indicators point in the same direction?
❓ Frequently Asked Questions (FAQ)
Q. Is SMA20 the most important moving average?
A. It's hard to say it's the single most important one, but it is one of the most widely used short-term moving averages. Institutional investors and traders commonly use the 20-day, 50-day, and 200-day moving averages, representing short-term, medium-term, and long-term trends, respectively. Which one matters most depends on your investing style. Day traders focus more on the 5-day or 10-day moving averages, while long-term investors place greater weight on the 200-day moving average. SMA20 is especially useful for swing trading and is also used as the centerline of Bollinger Bands.
Q. Can I just buy stocks that are above the SMA20?
A. Being above the SMA20 is a positive signal indicating a short-term uptrend, but it's not enough to make a buy decision on its own. You must also consider the company's fundamentals (earnings, growth), valuation (P/E, P/S), sector trends, and overall market conditions. Also, if the stock is above the SMA20 but stretched too far (+15% or more), it's short-term overheated and it's better to wait for a pullback. Use SMA20 as a first filter to narrow down buy candidates, then make your final decision after comprehensive analysis.
Q. Should I use SMA20 or EMA20?
A. Both are useful; choose based on your purpose. SMA20 is simple and intuitive to calculate, and it's less sensitive to sudden price changes, making it more stable for trend judgment. EMA20 reacts faster to recent prices, which is helpful for timing entries and exits, but it may also generate more false signals. In practice, there's not much difference, so the important thing is to pick one and use it consistently. Finviz provides SMA, so we recommend starting with SMA.
Q. Is SMA20 useful for long-term investors?
A. For long-term investors, SMA50 or SMA200 may be more useful. But SMA20 can still be put to use. For example, when making periodic purchases, you can buy a little more than usual when the price is below the SMA20, and buy less or skip purchases when the price is far above the SMA20, thereby lowering your average cost. You can also use the direction (slope) of the SMA20 on a weekly basis to gauge the overall market mood.
🇰🇷 Notes for Korean Investors
Differences in moving averages between Korea and the U.S.: In the Korean stock market, 5-day, 20-day, 60-day, and 120-day moving averages are commonly used. In the U.S., 10-day, 20-day, 50-day, and 200-day are more common. When investing in U.S. stocks, it's best to match the U.S. conventions (20, 50, 200) because many investors watch the same periods, creating a self-fulfilling prophecy effect.
How to use Finviz: In the Finviz Screener, you can apply the SMA20 filter with options like "Price above SMA20" or "Price below SMA20" to filter stocks. You can also check the gap (%) from the SMA20 directly in each stock's Overview tab. Combining SMA20 and SMA50 as filters lets you select stocks that are in both a short-term and medium-term uptrend.
Viewing charts: You can view SMA20 charts for free on TradingView. Just select "Moving Average" when adding an indicator and set the period to 20. Domestic broker MTS/HTS platforms also let you add moving averages to overseas stock charts.
Time zone considerations: Since the U.S. market opens during Korean nighttime hours, you can react in real time when the price crosses the SMA20 during your evening. However, since the market closes in the early Korean morning, it's more practical to check whether the price is above/below the SMA20 based on the closing price after the market closes and plan your strategy for the next day.