Golden Cross Pattern
A Golden Cross pattern is a pattern used when analyzing charts from a moving average perspective.
A Golden Cross pattern develops on a stock chart when the 50 Day moving average line crosses above the 200 Day moving average line. This pattern is considered by most to be a lagging confirmation of a new bullish uptrend that is already underway. However when I see a Golden Cross pattern develop, I see an opportunity present itself.
This next chart is a 2 year daily candlestick chart for Apple (AAPL). As you can see from this example, the Golden Cross pattern was definitely a lagging indicator for its new uptrend.
Analyzing the Share Price Action for Apple (AAPL) After It Developed Its Golden Cross and Death Cross Patterns
All is not lost when you discover a Golden Cross pattern, even though it is a lagging indicator for the new uptrend. Don’t get me wrong though, you will miss out on some of the initial profits from the new uptrend that is already underway.
The example for Apple (AAPL) in the above chart shows that if you had waited for the Golden Cross pattern to develop before entering into a long position, you missed out on the first 15% of gains.
Tips & Trading Techniques
Here are some of my trading tips and strategies to use when a Golden Cross pattern develops on your favorite stock chart.[s2If !current_user_can(access_s2member_level1)]….
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After a Golden Cross Develops, Purchase the Next Pullback to the 200 Day Moving Average
This trading technique is excellent when used as part of a scale-in strategy. After the development of a Golden Cross on a stock chart, the next pullback to or below the 200 Day moving average line is an excellent opportunity to make a scale-in purchase to go long.
Here is one illustration of how this strategy worked on a real chart. This is the same 1 year chart for Apple (AAPL). After the development of its Golden Cross pattern, it provided a really quick opportunity to purchase shares at the 200 Day moving average.
If you were not quick enough to purchase shares on that 1st pullback, AAPL offered 1 additional opportunity to purchase shares at the 200 Day moving average. Each purchase could have netted gains in excess of 15% in a relatively short period of time.
Apple’s share price has since gone on to reach new all-time highs for its share price (split-adjusted).
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