Saturday, July 13, 2024
WT24ConnectingVAS1100x220
DigitalSelect1100x220
Evina 110o x 220
MT2.1100x220

Golden Cross Indicator with The Nasdaq 100 index

The golden cross is a technical indicator that occurs when an asset’s short-term moving average crosses above its long-term moving average. This signal is often taken as a bullish indication, as it suggests that the asset’s price is beginning to trend upwards. This occurs when the 50-day moving average crosses above the 200-day moving average. The golden cross is viewed as a bullish signal by many traders and investors, as it suggests that the shorter-term trend is gaining strength and could continue higher over the longer term. Although the price of the Nasdaq 100 is now correcting, the golden cross signal shows that a longer-term bull trend may still be developing.

The Nasdaq 100 index

The Nasdaq 100 index is a stock market index made up of the largest 100 non-financial companies listed on the Nasdaq Stock Market.

The price of the Nasdaq 100 is influenced by a number of factors, including economic indicators, political events, and company performance. In the near term, the Nasdaq 100 price is correcting as investors take profits after a strong run-up in prices. A recent golden cross technical indicator suggests that a longer-term bull trend could still be emerging.

Prior to a drop from the recent highs, the price of the Nasdaq 100 broke over long-term trend line resistance at the beginning of 2023 (red line). The stochastic indicator on our chart shows that the price has now entered oversold territory as a result of the correction or retreat.

If certain bullish indications confirm the near-term support, traders could think about searching for a long entry in accordance with the longer-term bull trend, which is implied by the “golden cross” and the trend line break.

If the price closes strongly above the black trend line on the chart above, it may be a short-term bullish indicator. Preferably, a significant move out of oversold territory should occur simultaneously with this trend line break.

The Three Stages of a Golden Cross

The Golden Cross has three distinct stages. A downturn is present in the first phase, but it is nearing its end since increased purchasing activity is suppressing selling interest.

The establishment of a new upsurge is part of the second phase. When the short-term average crosses from below to above the long-term average, establishing the Golden Cross, indicates the start of a new uptrend.

The fresh rise continues in the last stage, and further gains are made, confirming a bull market. The two moving averages of the Golden Cross should serve as support levels during this period when corrective downward retracements take place. The bull market is seen as continuing as long as the price and the 50-day moving average both surpass the 200-day moving average.

Resistance to The Cross Signal

While the Nasdaq price is correcting in the near term, the golden cross indication suggests that a longer-term bull trend could still be emerging. The resistance to the cross signal is coming from two key levels. The first is the 200-day moving average, which has been holding as resistance since early February. The second is the February high of $6,136.

The resistance to the cross signal at these two key levels suggests that there is still some bearishness in the market despite the overall bullish tone of the golden cross. If prices can break above these levels, it would be a strong sign that bulls are in control and that a longer-term rally could be in store.

How to Use The Golden Cross

To use the golden cross, traders will typically look for crossovers of the 50-day and 200-day moving averages. For example, if the 50-day moving average crosses above the 200-day moving average, this would be considered a bullish golden cross.

Traders may choose to enter or exit positions based on golden cross signals or use them as confirmation for other technical indicators. For example, if a stock is showing strong price momentum and then experiences a golden cross, this could be interpreted as a signal to buy.

It’s important to remember that the golden cross is just one tool in a trader’s toolkit, and it should not be used in isolation. As with all technical indicators, it is subject to interpretation and can generate false signals in choppy markets. Nonetheless, the golden cross can be a useful addition to any trader’s strategy.

Conclusion

The Nasdaq 100 seems to be in a near-term correction phase and investors should proceed with caution.

However, the current golden cross indicator suggests that the market could still be heading for a longer-term bull trend. Given this potential opportunity, investors must remain informed and prepared to capitalize on any short-term corrections while also ready to take advantage of any sustained bullish trends moving forward.

By understanding the indicators and techniques used to determine the potential for a longer-term trend, traders and investors can better position themselves to capitalize on any opportunities that may arise.

Subscribe to our newsletter

To be updated with all the latest news, offers and special announcements.

CFM600x500
MobileArts600x500
MT2.600x500
Evina 900x750