These Three Stocks Just Formed "Golden" Signals

Technical Analysis has exploded in popularity with investors over the last ten years.

The use of moving averages, oscillators, momentum indicators, volatility measures and other price-based tools can benefit every investor.

But as with anything else in life, too much of a good thing can be bad.

Rule Number one when using technical analysis is “Keep it simple”

There are hundreds, even thousands of different technical indicators out there.  That’s why it’s important to keep it simple.

Two technical indicators/patterns that are simple and effective in forecasting higher prices are the “Silver Cross” and “Gold Cross” patterns.

What is a Silver or Gold “Cross”?

A Silver Cross happens when a stock’s 20-day moving average crosses above its 50-day moving average.

Golden Crosses are signaled when a stock’s 50-day moving average moves above its 200-day moving average.

In both cases, a shorter-term trendline crossing above a longer-term trendline usually signifies a transition from either a correction or consolidation into an uptrend, and thus it’s typically a bullish catalyst for the stock.

Another property of stocks that have seen a Silver or Gold Cross is that they are gaining positive momentum.  This means that their bullish trends are gaining even more strength.

My models scan for gold and silver crosses each day to find stocks moving into Wall Street’s “fast lane”. (As traders, we’re more interested in silver crosses because they’re more likely to develop into better, faster gains.)

While the “cross” puts a stock on my radar, I learn everything that I need to know by putting eyes on the charts and following a few simple rules..

“Flat 200-day, Walk Away”

Stocks making a Silver or Gold Cross may be in a trading range that is likely to continue.

Look at the chart for Kraft Heinz (KHC) below.

KHC shares have been locked in a long-term bear market trend with the stock making lows in July.  The stock has recovered from those lows, but the long-term trend is still negative.

KHC Price Chart

As a result of the recovery from those July lows, KCH are seeing a Golden Cross.  But using that 200-day rule keeps you away from the stock as there just isn’t any real momentum to move shares higher.

Bottom line, I’m not likely to see a fast and aggressive move higher from the stock so I’m taking a pass.

“Rising Trends are a Bullish Trader’s Friend”

When both the 20- and 50-day trendlines are rising it’s a cue that you’re on to something.

Following one of my Ten Commandments of Trading, the Trend is your friend.  This is almost always represented by a rising 50-day moving average.  On average, a stock is likely to close higher the next day two out of three times when the 50-day is rising.  That’s usually a trend worth trading.

The fact that the 20-day is making a cross above the bullish 50-day tells you that a stock is making a breakout into another trading trend higher.  These are usually followed by a bullish breakout.

The chart of Metlife (MET) is a good example.

Bottom line: These are the stocks that traders want to take a closer look at.

MET Price Chart

Let’s Look at Stocks Forming a Bullish Golden Cross

As a reminder, a Golden Cross is formed when a stock’s 50-day moving average crosses above its 200-day moving average.

The pattern is a signal of increasing bullish momentum for a stock.

As of Today, there are only 8 stocks in the S&P 500 and Nasdaq 100 that have completed a Golden Cross pattern in the last five days.  They can be found in the table below.

Golden Cross Stocks

Here are Three Trading Ideas from the List of Eight…

Deere & Company

Makers of John Deere tractors, Deere (DE) shares have been on a comeback rally over the last three months.

That rally is resulting in a Golden Cross pattern forming just above the stock’s $380 level.

The stock’s 50-day moving average turned bullish in Late August followed by its 200-day moving average doing the same just a few weeks ago.

One reason for the interest in Deere shares is the improving outlook for the economy and China’s recent stimulus.

Industrial companies like Deere and Caterpillar (CAT) – also producing strong technical momentum – thrive in expanding economies as construction and other industrial companies require additional heavy machinery.

The companies also benefit from the services required to maintain those machines when they are busy being used versus sitting idle.

Deere & Company shares have been in a wide trading range since the bear market in 2022, but a break above $430 will build long-term momentum for the stock to move towards new highs above $450.

DE price Chart

United Airlines

The airline industry showed signs of slowing over the summer.  Investors were concerned that higher rates were going to slow down discretionary spending like travel.

With lower rates finally arriving, investors are moving back into the airline stocks as United (UAL), Delta (DAL) have moved into bullish trends.

As a kicker, Southwest, American and other airlines have been struggling with costs and labor unions.  This has made United and Delta shares more attractive investments in the industry.

Shares of United just formed a bullish Golden Cross at $46.50.  Both trendlines are in bullish patterns, indicating that the stock has significant bullish momentum.

Take note though, shares of UAL are trading in “overbought” territory.  Put simply, the stock has moved too high too quickly.

Overbought situations often result in a consolidation or short-term drop in the stock.

The good news is that this means an opportunity to “buy the dip” is likely to happen on UAL shares in the near-term.

Investors may want to set an alert for $55 on United Airlines as this would represent a nice pullback from the current overbought prices before the stock’s next surge higher.

UAL Price Chart

Visa

Visa (V) shares had a rough September after Bloomberg reported that the credit card company was the target of a Department of Justice investigation for debit card monopolization.

Shares dropped more than 6% to find support at…. The stock’s 50- and 200-day moving averages.

That “double barreled” support helped for a short-term bottom for the shares from which they continued higher.

Today, the stock is seeing a Golden Cross form at $272, just a few dollars under current prices.

Both the 50- and 200-day moving averages remain in a bullish trend, forecasting higher prices for Visa.

The company is preparing for earnings on October 29, when there will likely be comments from management on the Department of Justice investigation.

For now, the stock remains a in a bullish trend with a target price of $325.

Visa Price Chart

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