Golden Cross & Death Cross

This indicator is based on the 50-day SMA (Simple-Moving-Average) and 200-day SMA. The points which are flagged are the crossovers of the two. One distinguishes between a bearish crossover, when the 50SMA moves below the 200SMA and a bullish crossover, when the 50SMA moves above the 200SMA.

The bullish cross is commonly referred to as a Golden Cross.

The bearish cross is commonly referred to as a Death Cross.

Amongst traders the Death Cross is the more exciting one, since it signals a bearish downturn and further losses in the stock.

This signal is commonly regarded as a lagging indicator, since the 50 & 200SMA move very slowly and a substantial part of the corresponding bearish or bullish formation will have already been established before this signal is encountered. Nevertheless it can indicate further losses or gains ahead and is therefore important.

The 200SMA is also a significant support or resistance of the underlier.

Links:

  1. http://www.investopedia.com/terms/g/goldencross.asp
  2. http://www.investopedia.com/terms/d/deathcross.asp
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