Death Cross

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A death cross is a price chart pattern when the short-term moving average (MA) drops below the long-term MA. The most popular MA used by traders is the 50-day MA (50 MA) and the 200-day MA (200 MA). The pattern can signal that a correction or bearish momentum will happen.

Identifying the occurrence of death cross will usually be preceded by three stages. First, asset prices are heading towards a consolidation phase or falling deeply after going through a long uptrend phase. At this stage, the MA50 is still at the MA200. Second, the movement of the MA50 exactly crosses the MA200. It is during this second stage that a death cross occurs and is an indication of a bearish trend. Third, the momentum of an asset price correction and trend change to a downtrend. At this stage, generally, asset prices have traded below the MA50.

Besides MA50 and MA200, some traders also use MA30 and MA100 in looking for death crosses. However, like other technical indicators, there is no guarantee that a death cross will give the right signal. Different technical indicators are still needed so that the analysis results can be much more accurate. Learn more about technical analysis and its indicators in the following article.

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