What are we looking for?
Stocks displaying the “golden cross,” a bullish technical signal.
One of the most easily identified patterns on a stock chart is the golden cross, which is widely recognized as a sign that the market has turned in favour of a stock.
In order to spot this pattern, investors need to watch two moving averages, one short term (such as 50 days) and one longer-term (such as 200 days). Moving averages plot the average value of a security’s price over time, thereby eliminating the noise caused by daily volatility.
A golden cross occurs when the 50-day moving average turns upward and crosses the 200-day moving average. (The reverse of this pattern is known as a “death cross” and signals an impending downtrend.) Ideally, a golden cross is accompanied by an increase in trading volume – seen as confirmation of market bullishness. Some technical analysts insist that a true golden cross requires both moving averages to be trending upward. However, a clear intersection of the two is often enough to signal a positive change in the stock’s trajectory.
We looked for North American stocks that have exhibited a golden cross within the past two weeks. Penny stocks and those with a history of high volatility have been weeded out.
What we found
The stocks we’re left with come from a broad array of sectors, including tech, energy, industrial and consumer. All of them show this clear bullish pattern. A separate check of their stock charts on Globe Investor confirms that a few – such as U.S. Physical Therapy Inc. and Zale Corp. – display the much-valued volume increase as well.
It’s important to remember that moving averages are lagging indicators as opposed to leading ones. They will not tell you where a stock is going, only where it’s been. However, moving averages are regarded as reliable indicators of momentum and, when combined with other indicators, can provide investors with clear signals as to which way the stock is headed.
Keep in mind that the existence of a golden cross does not in itself justify buying a stock. Be sure to do your own research before investing in any security.
Companies experiencing a 'golden cross'
|Company||Ticker||Market Cap ($-mil)||Recent Price $|
|Clean Enviro Tech||CETC-Q2||13.5||1.19|
|Gold Reserve Inc.||GRZ-X||212.3||2.81|
|Life Time Fitness||LTM-N||2,207.9||49.59|
|MGT Capital Invest.||MGT-A||28.3||4.48|
All currencies are local. Source: Bloomberg
|Company||Ticker||Market Cap ($-mil)||Recent Price $||Total Return YTD %|
|Clean Enviro Tech||CETC-Q2||13.5||1.19||585.0|
|Gold Reserve Inc.||GRZ-X||212.3||2.81||-12.4|
|Life Time Fitness||LTM-N||2,207.9||49.59||4.2|
|MGT Capital Invest.||MGT-A||28.3||4.48||21.0|
|US Physical Therapy||USPH-N||378.6||29.38||14.8|