Articles

Heads Up! These YTD Performers Just Generated a Golden Cross!

Written By: Lyster Rosales
Reviewed by: Mike Reyes
Last Updated June 7, 2023
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Finding a reliable strategy that provides consistent returns is every trader’s dream. These strategies give you the confidence to trade once the signal comes up, fully expecting a high potential for a win. Many analysts and researchers have developed profitable techniques over time, which you will find in finance and investing literature. Today we’ll discuss one of the most recognized and trusted signal strategies: the “Golden Cross.

What is a golden cross?

A golden cross happens when a security’s short-term moving average crosses over a significant long-term moving average to the upside. One of the most common moving average combinations traders use is the 50-day and 200-day simple moving average. Traders and investors can use combinations that suit their requirements (i.e., 20-day and 100-day SMA, etc.). Analysts and traders interpret it as signaling a definitive upward turn in a market due to how investors are willing to buy the security higher in the short term, which results in it trending up faster than its long-term average until they cross.

How can you trade golden crosses?

Golden crosses can provide traders and investors with opportunities to buy into securities that are starting to change their trends. As prices move alongside the short-term moving average and close above their long-term support, it signals a change in the security’s sentiment. For example, when MSFT’s 50-day SMA (red line) crossed above its 200-day SMA, it gave investors the needed confirmation that MSFT may have shifted its trajectory.

Traders can use that cross as the signal and use entry techniques like intraday patterns (triangles, flags, wedges, MA bounces, etc.) for an efficient entry.

Trading components that complement the golden cross for higher trading performance

Like any other strategy, the golden cross has its flaws and limitations. However, using additional indicators can complement the golden cross and provide a stronger conviction to the trade idea. Here are a few indicators you can pair with it.

Relative Strength Index

The RSI is a momentum indicator that measures the speed and magnitude of a security’s price changes. This allows investors and traders to evaluate overbought or undersold conditions in the price of that security. The RSI is displayed as a line graph that moves on a scale of zero to 100. One of the other uses that traders can use RSI to complement the golden cross is when prices move from above the 50 midpoint, which indicates that the security has now increased its momentum and started to go bullish.

Trading Volume

The volume provides investors with a barometer of how investors see the signal. The stronger the volume spike, the more it shows how other investors are willing to participate in the trade.

Support and Resistance lines

Support and resistance lines can give investors a general idea of how far prices can rise before a potential resistance area is met and if the potential return can be worth the downside risk.

Now, let’s look at some stocks that recently made a golden cross! 

Airsculpt Technologies Inc (AIRS)

YTD Return: 113.34%

AirSculpt Technologies, Inc. is a holdings company that provides practice management services to professional associations (PAs) in the United States and Canada through management services agreements (MSAs). Its business offers body contouring procedures under its brand Elite Body Sculpture. Elite Body Sculpture provides clients custom body contouring using its proprietary AirSculpt method. Airsculpt removes unwanted fat using a minimally invasive procedure with effective results. The company also provides fat transfer procedures that help clients enhance the breasts, buttocks, hips, or other areas without requiring silicone or foreign materials to be implanted. The company also provides body contouring procedures, including:

  • Power BBL
  • Up a Cup
  • Hip Flip

Can you buy it now?

AIRS gave a Golden Cross signal and is trading around its resistance area. In addition, AIRS is forming a rising flag pattern, a bullish price trend. The pattern shows investors that stock prices are contracting and are ready for a breakout or breakdown. Investors can wait for confirmation on the breakout for a lower-risk entry on AIRS.

Crispr Therapeutics Ag (CRSP)

YTD Return: 55.08%

CRISPR Therapeutics AG is a Switzerland-based gene editing company that develops CRISPR/Cas9-based therapeutics that focuses on precisely altering specific sequences of genomic DNA. CRISPR/Cas9 stands for Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR)/CRISPR-associated protein 9 (Cas9). 

The company aims to apply this technology to delete, disrupt, correct and insert genes to treat genetically-defined diseases. The company also aims to engineer advanced cellular therapies with this technology. CRISPR has rights to the intellectual property (IP) encompassing CRISPR/Cas9 and related technologies, as well as technologies involved in its IP research and additional in-licensing efforts. 

Should you wait for a breakout?

CRSP’s Golden Cross signal is moving in line with a triangle pattern that is occurring on a daily timeframe.  While there is no sign of a breakout, it is still a waiting game for most investors willing to be on the safe side of the trade. Investors and traders can wait as triangle patterns can generally go upward or downward and retest their previous support. 

Brookdale Senior Living Inc. (BKD)

YTD Return: 29.67%

Brookdale Senior Living Inc. operates and manages 673 senior living communities in 41 states. Its operations focus on independent living, assisted living and memory care, and continuing care retirement communities (CCRCs). Brookdale operates through three segments: 

  • Independent Living
  • Assisted Living and Memory Care
  • CCRCs

The Independent Living segment focuses on owned or leased communities that are intended for middle to upper-income seniors. It is meant to provide a residential setting that feels like home without the efforts of ownership. Assisted Living and Memory Care focuses on owned or leased communities that offer housing and 24-hour assistance to the company’s residents’ daily living and activities. The CCRCs segment includes owned or leased communities that provide different sets of living arrangements and services to accommodate a spectrum of physical ability and healthcare needs of their clients. 

Aren’t these mixed signals?

BKD’s golden cross signal is giving traders and investors a weak confirmation in terms of its price action. Even though SMA’s have crossed, prices are trading below the SMA and in the middle area of its support and resistance, which tells us about the indecisiveness of the market. Investors and traders willing to buy into BKD can wait for clear signs of direction, like when prices break above the SMAs with a follow-through volume. 

Final Thoughts

Golden crosses can be a great way for investors to buy into securities that will start to move into a new trend. Being of the most common signals investors and traders commonly recognize, it adds a reputation of being a reliable signal when conforming to other indicators as well. However, like any other strategy, proper risk management should be employed to ensure that any false signal will not be detrimental to any trader’s portfolio. 

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