Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Golden Cross

What it is:

In the trading world, a golden cross occurs when a stock's short-term moving average rises above its long-term moving average.

How it works (Example):

For example, let's assume that Company XYZ’s 15-day moving average has been about $14 per share. But over the last two weeks, the 15-day moving average has been rising. Company XYZ's 200-day moving average is about $16.50 -- higher than the $14 short-term moving average -- but declining.

Because Company XYZ’s 15-day moving average has been increasing, by the end of two weeks, the 15-day moving average is now higher than the 200-day moving average. The point at which the rising 15-day moving average crosses (that is, equals) the 200-day moving average is called the golden cross.

Why it Matters:

A golden cross is a telltale sign of bullish sentiment for a stock and sometimes for the economy as a whole. Thus, investors who watch technical trading charts tend to buy a stock when the short-term moving average rises above the long-term moving average, and they tend to sell when the short-term moving average falls below the long-term moving average.