trading

death cross

A bearish technical signal when a short-term moving average (typically 50-day) crosses below a long-term moving average (typically 200-day).

Example

“The death cross in late 2021 warned technical traders of the coming bear market.”

Memory Tip

DEATH CROSS = the 50-day crosses BELOW the 200-day. Death = bearish. Sell signal.

Why It Matters

The death cross helps individual investors identify potential downturns in stock prices before they become severe. Recognizing this signal can prompt you to review your portfolio holdings and consider whether to reduce risk exposure or shift to more defensive investments.

Common Misconception

Many people believe that a death cross guarantees a stock will fall significantly, but it is only a warning sign that suggests increased selling pressure. Markets can recover quickly after this signal appears, so it should be one of many factors in your investment decision rather than a standalone reason to sell.

In Practice

Suppose a stock traded at 150 dollars with a 50-day moving average of 145 dollars and a 200-day moving average of 155 dollars. If the stock declines and the 50-day average crosses below the 200-day average, this death cross occurs and signals that recent momentum has shifted negative, potentially prompting investors to exit positions they had been holding.

Etymology

DEATH (negative, ominous) CROSS (where two lines intersect). A CROSS that signals DEATH (decline) of a trend.

Common Misspellings

death-crossdeath crrossdeath cros

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