A quick thought on golden crosses....
posted on
Sep 29, 2016 01:29PM
Just a couple points I wish to make....purely speaking a Golden Cross is when "ANY" faster moving average crosses over ANY slower one.
So that could be the 20 DMA crossing the 50 or 100 or 150 or 200.....The lower the number the faster the MA moves. The 20 dma is the average price of the preceding 20 days...so it will react faster to a changing price than the 50 DMA which is the average price of the preceding 50 days. And the 200 DMA reacts slowest to a changing share price because its the average price over 200 days.....Its for that reason I consider the 200 as the Queen Mary of Moving Averages.
The 50/200 is the goldenest of golden crosses for me (and I'm not alone, for some the only GC is the 50/200) because the 50 and 200 are the most commonly followed MAs. Trading alerts from outfits like 'The Street' will often report how much higher or lower the PPS for a stock is relative to the 50 and 200 DMAs. "ABCD is currently trading at $2.00 per shares which is 32% above the 50 day moving average".
The final point is the direction of the 200DMA.....there are some TA afficianados who will insist that for a GC to be a true GC, that the 200DMA has to be moving up, or at least be flat....if the 200 is moving down they will say it is NOT a GC. For my own part I still view a GC as a GC regardless of what direction (up/down/flat) the 200 is moving.....but I do consider it more bullish if the 200 is moving higher....and I'm glad to see ours now moving higher.