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Death cross

Death Cross

The death cross is a bearish technical analysis pattern that occurs when a short-term moving average (typically the 50-day) crosses below a long-term moving average (usually the 200-day). This pattern suggests a potential long-term downtrend and is often viewed as a signal to sell. The death cross indicates that the market's momentum has shifted from bullish to bearish, with sellers gaining control over buyers.

Example

A trader sees the 50-day moving average of a stock crossing below the 200-day moving average, forming a death cross and signaling a potential downturn in the stock price.

Key points

• The death cross is a bearish signal that occurs when a short-term moving average crosses below a long-term moving average.

• It suggests a potential long-term downtrend and is often considered a signal to sell.

• It reflects a shift in market momentum from bullish to bearish.

Quick Answers to Curious Questions

What does the death cross indicate?

The death cross indicates a potential long-term downtrend, signaling that sellers have gained control over the market.

Which moving averages are typically used in a death cross?

The 50-day moving average is often used as the short-term average, and the 200-day moving average is used as the long-term average.

What should traders do when they see a death cross?

Traders may consider selling or shorting the asset, as the death cross signals a bearish market trend.

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