[Summary]
A golden cross is when a short-term moving average crosses a long-term moving average from below to above.
It is generally known as a sign indicating a change to an uptrend.
However, just because a golden cross appears does not necessarily mean that the stock price will rise. Since it may appear later after it has already risen, we will look at it in conjunction with trading volume, business performance, and overall market conditions.
What is Golden Cross?
The Golden Cross is a typical technical indicator that uses moving averages.
Commonly used combinations include:
| short term line | long term line |
|---|---|
| 5 day line | 25th line |
| 25th line | 75 day line |
| 50 day line | 200 days line |
When the short-term line exceeds the long-term line, it indicates that the recent stock price is stronger than the historical average.
Why is it considered a buy signal?
When stock prices change from falling or flat to rising, short-term averages react first.
When the short-term line crosses above the long-term line, the market sees that the tide may have changed.
Therefore, the Golden Cross attracts attention as a sign of an upward turn.
Points to note
The Golden Cross is a lagging indicator.
Sometimes it comes after the stock price has already risen considerably.
There is also a "deception" in which the market stalls immediately after breaking out.
The points you want to check are as follows.
- Is trading volume increasing?
- Is it accompanied by achievements and materials?
- Is the long-term line also trending upward?
- Are you grabbing high prices?
- Isn't the overall market situation bad?
Summary
The golden cross is a typical sign that confirms an upward reversal.
However, rather than buying just that, checking the trading volume, performance, and stock price position will make it more practical and easier to use.