Five popular stocks have recently seen golden crosses. The stocks represent a diverse set of sectors, which adds significance to the individual signals and may be a bullish indication for the broader market.
A "golden cross" occurs when the 50-day moving average moves above the 200-day moving average, and it suggests that a long-term bullish trend is underway. Moving averages are by definition lagging indicators, and the golden crossover reflects an upswing that is already in progress, so the signal needs to be validated by other technical indications before you make a trading decision.
Here's a closer technical look at the five stocks.
The daily chart of Amazon (AMZN) - Get Report shows the stock making an inverse head and shoulders bottom this year with neckline resistance in the $580 area. Amazon broke through that level last month and has established a strong uptrend line.
The relative strength index crossed above its centerline just after the stock tested the confluence of moving average support in March, and moving average convergence/divergence is above its centerline. Chaikin money flow crossed into positive territory as the head of the reversal pattern formed at the February low.
The stock continues to make higher highs and higher lows, confirming that it is in a primary uptrend.
A similar technical scenario is playing out on the Activision Blizzard (ATVI) - Get Report chart, with a cup and handle formation marking the reversal low. The stock has been trending higher since breaking above rim line resistance in another well-defined series of higher highs and higher lows.
Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator and is above its centerline on both timeframes. This represents positive intermediate-term price momentum and trend direction. Volume is weak, but money flow is positive, and the accumulation/distribution line is tracking higher and above its 21-period signal average.
Market correlation is evident in the inverse basing formation on the chart of Schlumberger (SLB) - Get Report , which had been trending lower since July 2014. The stock held its February low, then moved higher before consolidating in a narrow range between the long-term downtrend line and the area of neckline support. It broke out of that triangle-like pattern this month and began the second phase of the rally off the lows.
The pullback in the relative strength reading and the money flow index, which is a volume-weighted relative strength measure, suggests that the rally in the energy space may be due for a rest. If that turns out to be the case, a successful retest of the uptrend line would be a good long entry point.
From a fundamental perspective, Schlumberger is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. Recently, Cramer and Research Director Jack Mohr raised their price target on the stock to $85 from $80. They wrote:
"Although we expect first-quarter weakness to spill into second-quarter results, we are in the name for the long term, and are willing to pay a premium for its outsized leadership, balance-sheet capacity, robust free cash flows and ability to continue capturing share while driving growth -- which we expect to kick in throughout the second half of the year and accelerate through 2017 and beyond."
Intel (INTC) - Get Report has returned to a key support level of its own, just above the intersection of the 50- and 200-day moving averages. This is also the bottom end of the narrow channel pattern that the stock has been trading in for the last month.
During this consolidation period, the price and trend momentum indicators have been in slight bearish divergence, and Chaikin money flow has dropped under its 21-period average.
The validity of the golden cross will be confirmed if the stock is able to hold support and eventually break above channel resistance.
The previous stocks are all trading above the intersections of their moving average crossovers, but BlackBerry (BBRY) shares are trading below the averages. There has been an unusual amount of volatility this year, even for this long-struggling stock, but it has been attempting to hold above the $7 level, which is interior support within a large symmetrical triangle pattern.
The stabilization has given the stochastic and moving average convergence/divergence oscillators time to make bullish crossovers, and the accumulation/distribution line and Chaikin money flow have moved above their signal averages.
This stock has a lot to prove, but a move back above the area of resistance marked by the intersection averages and the triangle downtrend line would be a major bullish accomplishment.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.