What is a death cross?
Death cross may signal further selling is coming
A death cross is a technical pattern that occurs when a security’s short-term moving average crosses below one of its longer-term moving averages. Typically, traders use the 50-day and 200-day moving averages.
The pattern, which gets its name from the “X” that is created when the crossover occurs, is a warning to investors that a long-term downtrend may be underway.
Death crosses usually don’t occur until the underlying security has already been mired in a decline. Typically, a death cross carries more weight when both moving averages are downward sloping.
While a death cross is a signal of a bearish bias, traders use other indicators to strengthen their conviction that a selloff is coming.
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The death cross is the opposite of the golden cross, which occurs when the 50-day moving average crosses above the 200-day moving average.