A death cross is a bearish technical trading indicator that occurs when the 50-day moving average falls below the 200-day moving average, indicating a big sell-off.
It is important to
identify the key stages of a death cross to lock the perfect time of getting out of the market before the bearish trend begins. There are three main stages of a death cross:
Notice how the graph was moving in a horizontal direction when the yellow line (signifying the 50-day moving average) was above the purple line (the 200-day moving average). When the
200-day moving average crosses the 50-day moving average from below,
a death cross is formed and the price falls from that point, and later, recovers slightly when a golden cross is formed.
Like every technical indicator, using the death cross alone is not a good strategy. Financial analysts advise using a variety of
technical indicators to understand the price and volume activity from different angles before making a concrete decision to buy or sell an asset/stock/cryptocurrency. These technical indicators include, but are not limited to
accumulation/distribution indicator, on-balance volume (
OBV), relative strength index (
RSI), moving average convergence divergence (
MACD), and the stochastic oscillator.