- Moving Average crossovers are a popular way traders use this indicator
- A valid crossover happens when the faster moving average crosses either above a slower moving average which would be called a bullish crossover or below which is called a bearish crossover
- When the 50-day simple moving average crosses below the 200-day simple moving average, it is commonly called a “Death Cross” and signifies a large bearish move.
What is the ‘Death Cross’ pattern?
Though its sounds scary and ominous, the ‘Death Cross’ (DC) pattern is neither. In fact, consumers that are tired of paying $80 or more to fill up their gas tank will rejoice at what this pattern means to the price of oil. The DC occurs when the short-term 50-day simple moving average crosses below the 200-day simple moving average. Typically, in a moving average crossover, a shorter term moving average crosses below a longer term moving average a sell signal is generated and price is expected to move lower. What makes the DC different is that the 200-day SMA is watched by so many traders to determine long term bullishness or bearishness that when the 50-day crosses below the 200, the selling can be substantial as institutional and retail selling converge.
Learn Forex: USOil Moving Average Death Cross
(Created using FXCM’s Marketscope 2.0 charts)
In the chart above there are 4 DCs on USOil which led to significant price moves lower. There is one DC on June 18, 2010 in which the decline was minimal. In fact, since 1984, there has been 21 Death Cross (DC) formations on oil with an average decline of 8.3% over the following 6 months after the crossover. With the current price of oil just south of $92.00 per barrel, we could see a decline down to the $80- $84.00 region once oil closes, on a daily basis, below the current trend line. This will be good news for oil bears and US holiday drivers but bad news for Oil bulls, for now.
In each of case of the DC, the following price decline was short-lived and a sharp rebound followed. This could give new life and a great entry point for those who are bullish oil. Such a rebound would need confirmation. Oil bulls will wait their turn and may look for the advent of the Golden Cross before initiating longs. The Golden Cross is made up of the 50-day simple moving average crossing above the 200-day simple moving average and is a major buy signal. The DC is nothing to fear if you know which direction to trade. It marks the possible acceleration and extension of and oil “slide” lower.
ForexAmid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
Forex FundamentalsAs the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
EconomicsOne particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
ForexBreaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
InvestingAccess to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
EconomicsSouth Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
Forex EducationPeer-to-peer (P2P) currency exchange networks offer a viable and cheaper alternative for buying and selling currencies.
ForexHere is a simple breakdown of how to open an offshore forex account for US-based users, including legal requirements.
EntrepreneurshipA brief overview of the top apps that help forex traders with on time information, charts and more.
Investing BasicsVirtual currency is probably here to stay, but what about Bitcoin specifically? Does it have a first-to-market advantage? What are the risks involved?
- No results found.