Golden Cross Stocks: Definition With Charts and Examples

This move signaled a bullish trend reversal, coinciding with GOOGL’s price surge in the following months. Some traders opt to use different moving averages to indicate a Golden Cross. For example, a trader might substitute the 100-day moving average in place of the 200-day.

It may not occur until well after the market has already turned from bearish to bullish. In the final phase, the new uptrend is prolonged, with continuing gains that confirm a bull market. During this phase, the Golden Cross’ two moving averages should both act as support levels when corrective downside retracements occur. As long as both the price and the 50-day average remain above the 200-day average, the bull market is considered to remain intact. While it’s possible to profit from short-term market trends, buy-and-hold investing and dollar-cost averaging have a far better track record of building wealth.

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Dependence on Historical Data

Amongst the best known indicators used by the technicians is the Golden Cross. Despite its popular following, there has been surprisingly little research on whether the golden cross actually works and what it really tells the investor. As it turns out, there is money to be made through Golden Crosses – but not necessarily in the way that many chartists think. False signals occur when the golden cross fails to materialize or swiftly reverses post-crossover, resulting in losses for traders following the signal. Delayed signals happen when the golden cross occurs too late, after a significant price movement, leading to missed opportunities or reduced profits for those who followed the signal. For instance, in August 2017, the 50-day moving average (shown as a red line) crossed above the 200-day moving average (depicted as a blue line) in the GOOGL chart.

1. Traders can use the Golden Cross along with indicators like RSI or MACD to confirm the strength and length of the potential new bullish trend.
2. As such, a golden cross on a longer time frame will probably have a more powerful impact on the market than on the hourly chart.
3. A golden cross could be said to be a bullish moving average breakout, where the long term period moving average becomes the resistance level that’s breached by the shorter period moving average.
4. However, this time we demonstrate the strength of the signal and the potential run a stock can make after a golden cross materializes.
5. Either cross may appear and signal a trend change, but they more frequently occur when a trend change has already occurred.
6. This makes it a preferred choice among traders looking to improve on longer-term trends rather than short-term fluctuations.

Just as with the cup and handle pattern and the head and shoulders pattern, investors use the golden cross pattern to help them identify trends. Either cross may appear and signal a trend change, but they more frequently occur when a trend change has already occurred. The first stage requires that a downtrend eventually bottoms out as buyers overpower sellers. In the second stage, the shorter moving average crosses over the larger moving average to trigger a breakout and confirms a downward trend reversal. Opinions are divided on its merits of technical analysis (TA) but, for many investors, TA of share price movements is a vital tool in deciding when to buy and sell stocks.

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To catch the next upward leg right from the beginning, traders should aim for pullback points, i.e., when the price pulls back to the short-term MA. In the case of a golden cross, the long-term MA is observed to be a significant support level, whereas, in a death cross, it’s seen as a resistance level for the market after the crossover has occurred. A golden cross requires a 50-period moving average and a 200-period moving average. They are illustrated on the META daily chart by the 50-period MA line in purple and 200-period MA line in blue. You can add momentum indicators to the chart to confirm the breakout. A momentum indicator like the relative strength index (RSI) will confirm the breakout by rising towards the 70-band.

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Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations. Zacks may license the Zacks Mutual Fund rating provided herein to third parties, including but not limited to the issuer. Sometimes you can get head fakes or false breakouts on initial golden cross patterns. This can happen with the 50-period MA initially crossing up through the 200-period MA but then fizzling and falling back down again. Park’s work suggests that the ratio of short-term to long-term moving averages does have a meaningful amount of predictive power for future returns.

What you can also do is look for areas of resistance overhead which will act as selling opportunities for longs that have been holding the Linux for Network Engineers stock for a long period of time. Typically, bag holders from higher prices will be glad to get out at break-even. The chart begins with a strong downtrend, where the price action stays beneath both the 50-period and 200-period SMA.

To see all exchange delays and terms of use please see Barchart’s disclaimer. It helps to add other price and momentum indicators when using this trading strategy. Here are the good and not-so-good things to know about golden cross stocks. This means the 50-period MA starts to flatten as the 200-period MA catches up. From here, either another leg of the uptrend forms as the 50-period MA rises again or the 50-period MA turns and crosses the 200-period MA down, forming a breakdown. Here are scenarios highlighting the application of the golden cross in various market conditions.

The Bullish Bears trade alerts include both day trade and swing trade alert signals. These are stocks that we post daily in our Discord for our community members. An investor could potentially lose all or more of their initial investment. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success. You can cycle through thousands of charts and replay the data to see which golden cross setup the top 5 international bond etfs for 2016 works best for your trading style.

By the end of this article, you’ll be able to identify golden cross stocks. Whether you’re an investor or trader, they can be part of your arsenal to analyze stocks for potential trades thoroughly. The golden cross preceded the powerful rally that surged the S&P 500 up through pre-COVID-19 levels. We’ll explain golden cross patterns, nuances and how to use them for your trades.

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