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Kevin: 00:03 Not every term in investing is indicative of its effect. Luckily or maybe unluckily a death cross is exactly what you'd expect. For traders, a death cross is formed when shorter term moving average like the 50 day price crosses over and trends below a longer term moving average like the 200 day. This pattern occurs when there is a major selloff in a stock or index and has often been seen as a trustworthy indicator of bearish trends both in individual stocks and in broader markets. For a concrete example, Nvidia's stock chart pattern formed a death cross in mid-November 2018, subsequently fell over 30% as the charts exacerbated problems presented in the company's earnings released that month. Investors cognizant of the problematic pattern may have been able to avoid double digit losses that extended following the problematic earnings released if they had listened to the charts when they sounded that alarm. Still the death cross is a lagging indicator and as many traders will tell you, investing is not necessarily a history lesson. So make sure you engage with as many indicators and factors as possible, but you can keep the death cross in your tool belt because it could help you conserve your portfolio.

While technical indicators are by no means a magic ball, seasoned investors recognize that flashing signals from the charts can offer a big leg up.

The "death cross" is one that can often help save investors from realizing the full force of selling pressures that could cause a great deal of pain in their portfolios.

The pattern is formed when a shorter-term moving average, most commonly the 50-day moving average, crosses above the longer term 200-day moving average to the downside. The trend, coupled with strong trading volume, is seen as a key indicator of a sustained bearish trend ahead that investors should try to avoid.

Additionally, with algorithmic trading becoming an ever more dominant trend, the technical factor can spark added selling pressure and cement that trend.

For a concrete example, Bed Bath & Beyond (BBBY - Get Report) formed a death cross multiple times on its way down, most recently in late June as investors became worried about its July quarterly report. Had speculative traders trimmed positions at the signal, much of the pain on earnings day might have been avoided.

For a quick explainer on how to spot the pattern forming and what it means for investors, check out the video above.

For more in depth analysis of individual stock chart readings and a slew of other chart patterns to watch, head over to Real Money for daily insights from Market Technician Bruce Kamich.

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