What are we looking for?
Stocks on the verge of a “golden cross,” a key technical indicator of price momentum.
A moving average (MA) is an indicator frequently used in technical analysis showing the average price of a security over a set period. Historically, moving-average crossovers add horsepower to many types of trading strategies.
The golden cross, when the 50-day moving average crosses the 200-day moving average, is a chart pattern that generally has a positive bias. Moving averages, however, have one limitation: They are lagging indicators. My colleague Rob Belanger and I are using multiple moving averages to try and overcome that limitation, and perhaps predict an upcoming golden cross.
We started with North American companies over $500-million in market capitalization. The share prices of our companies had to increase every day last week. For example, RioCan closed at $24.50, $24.58, $24.71, $24.72 and $24.94 from Monday to Friday.
The 20-day MA had to be higher than the 50-day MA, and the 50-day MA had to be less than or equal to the 200-day MA. The theory is that the consecutive five-day share price increase will pull the 20-day MA higher, which will in turn pull the 50-day MA higher and closer to the 200-day MA – in other words, on the verge of a golden cross.
Volume can provide an indication of the worth of a market move; the higher the volume, the more significant the move. The 20-day average volume had to be greater than the 50-day average volume.
We also included the 30-day relative strength indicator (RSI). It is a technical momentum metric that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. Any reading over 70 would indicate a stock is overbought, so we restricted our search to stocks with an RSI under that threshold.
What did we find?
The companies that made our screen represent quite a diversified portfolio. Indianapolis-based Kite Realty Group is a U.S. shopping centre REIT with 65 properties in 12 states. The 20-day average volume is 80 per cent higher than the 50-day average volume.
Two ETFs made our list, iShares MSCI Thailand, and Market Vectors Agribusiness.
Companies that are very close to seeing the 50-day MA cross the 200-day MA include Valero Energy, Mattel Inc., Veresen Inc., Ritchie Brothers, NL Industries, and Viad Corp.
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Stocks approaching their 'golden cross'
|Northern Tier Energy||NTI-N||2,461||24.49||22.42||25.46|
|Delek US Holdings||DK-N||1,670||26.64||24.36||31.86|
|Kite Realty Group||KRG-N||926||6.71||6.39||6.41|
|iShares MSCI Thai||THD-N||643||81.68||81.28||85.38|
All currencies are in Canadian dollars. Source: Bloomberg and Wickham Investment Counsel Inc.
|Northern Tier Energy||NTI-N||2,461||24.49||22.42||25.46||1,140,665||1,103,305||64.7|
|Delek US Holdings||DK-N||1,670||26.64||24.36||31.86||947,951||906,570||55.8|
|Kite Realty Group||KRG-N||926||6.71||6.39||6.41||1,436,274||795,945||62|
|iShares MSCI Thai||THD-N||643||81.68||81.28||85.38||262,121||239,508||51|
- Allergan plc$235.94+3.58(+1.54%)
- Valero Energy Corp$54.57+0.48(+0.89%)
- Mattel Inc$31.78+0.15(+0.47%)
- RioCan Real Estate Investment Trust$28.08-0.08(-0.28%)
- PulteGroup Inc$18.860.00(0.00%)
- VanEck Vectors Agribusiness ETF$49.04-0.13(-0.26%)
- Veresen Inc$10.08+0.06(+0.60%)
- Northern Tier Energy LP$21.32+0.10(+0.47%)
- Ritchie Bros. Auctioneers Inc$42.46+0.16(+0.38%)
- Ryman Hospitality Properties Inc$48.51+0.39(+0.81%)
- Olin Corp$22.73+0.23(+1.02%)
- Delek US Holdings Inc$13.51+0.44(+3.37%)
- Kite Realty Group Trust$27.13+0.17(+0.63%)
- iShares MSCI Thailand Capped ETF$67.22+0.05(+0.07%)
- Prudential Short Duration High Yield Fund Inc$15.62+0.05(+0.32%)
- RAIT Financial Trust$3.32+0.04(+1.22%)
- NL Industries Inc$3.14-0.12(-3.68%)
- Viad Corp$31.87+0.42(+1.34%)
- Updated May 27 4:00 PM EDT. Delayed by at least 15 minutes.