Among the simplest and most popular technical stock indicators are moving average crossovers. Perhaps the most popular of all crosses is the infamous “death cross,” which occurs when a stock’s 50-day simple moving average (SMA) crosses below its 200-day SMA.
What Is The Death Cross?
As its name implies, the death cross is a traditionally bearish technical indicator and can signal the end of a long-term uptrend and the beginning of a long-term downtrend. The Dow Jones Industrial Average sits poised on the brink of its first death cross since 2011.
Is The Dow Out Of The Woods?
Although a big up day on Monday staved off the bearish signal for at least another day, the Dow will need to continue its strong rally throughout the rest of the week to avoid a cross within the next couple of days. Even after Monday’s 240 point rally, the Dow closed below both its 50-day and 200-day SMAs.
Other Recent Death Crosses
If and when the Dow likely experiences its death cross in coming days, it will join a handful of big-name stocks that have suffered the same fate in recent weeks.
General Motors Company (NYSE: GM) shareholders witnessed a death cross in the company’s stock in late July.
Oil services giant Schlumberger Ltd (NYSE: SLB) is the latest oil giant to experience a death cross in recent weeks.
Large-cap media company CBS Corporation (NYSE: CBS) also recently joined the death cross club.
It’s not all bad news when it comes to moving average crosses. The death cross’ cousin, the “golden cross,” which occurs when the 50-day SMA crosses above the 200-day SMA, is a bullish indicator that has also shown up in a couple of stock charts in recent weeks. Luxury jewelry maker Tiffany & Co. (NYSE: TIF) and biotech stock Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) both recently formed golden crosses in their charts.
Disclosure: the author owns shares of Schlumberger.
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