Identifying Golden Crosses

Everyone wants to identify stocks are which are about to take off.
I started developing scripts to help me with that.
I came across the 'golden cross' and ' death cross' concepts. A golden cross suggests a long-term bull market going forward. It is considered more significant when accompanied by high trading volume.

I tried to identify them using the top ASX 200 stocks.
https://public.tableau.com/app/profile/san4737/viz/Cross_16569451765690/Potentialbuys

Obviously, this indicator alone isn't enough to make a decision. But, I'll try to expand on it.
Let me know what you think. This is not mobile-friendly.

 

The golden cross looks like it occurs well after the share price in that graph has rocketed (and has peaked), and the death crosses occur well after the price has cratered (and has bottomed).
So you're buying at the top and selling at the bottom here?

 

Moving averages crosses are lag indicators, and also don't work particularly well in non-trending markets.

 

I agree. Not much meat left once the cross happens.
That's why I'm trying to identify them before it happens. 3% before it happens.

 

One of the best leading 'indicators' I've found which often has a high degree of accuracy is looking at bullish and bearish divergences with price action and say the RSI. Most everything else lags. Divergence isn't really an indicator either. It's interpreting a possible discrepancy with PA and conviction of it when set against the RSI for example.

 

Not trying to be rude here, but nobody is Robinson Crusoe when it comes to this stuff. If there was an edge to be found it has already been found. No need to reinvent the wheel.

Price is the best indicator. All other indicators are simply derived from price, so just look at the source data. Took me a long time to really understand this and I wasted a long time on useless things.

 

QAN was identified as crossing up. It has done well since the cross happened.

 

Forget the moving averages for a moment.

Look at price. How did the move start? Was there news (hint: there was)? How did it consolidate? How did the continuation move start? Does the consolidation & continuation remind you of a well known chart patten?

You also need to consider the market environment. We are currently in a bear - do moves like this have a high probability of working?

 

My 2c.

If price can close above $6.13, one could take a short hold trade for a few days using the daily chart. Buy at 6.13 or close to it, stop loss at $5.76. Personally, I'd choose the technicals of other stocks before QAN.

+Not advice.

 

@Sackie can you see the undercut and rally setup on the daily?

 

hmm tbh im not sure as I don't look at charts that way.. If i had to give my key take aways from that chart on the daily, this is whats most significant for me. Over 4 years I've applied this same analysis with very consistent results. Its basically volume profiling but i dont like to use any of those indicators. I prefer to do it manually and look at PA bar by bar. Here is just some of it.

I always want to know where the big orders are placed and try to increase the probability to determine if they are buying or selling orders. From there, its much easier to know where and when to go long or short.



- Circle is above massive volume. We need to now increase the probability to determine is it buying or selling order.
- Arrow above circle corresponds to the candle where the order was made. That level (1-2) is now my key area to watch. If price strongly closes below that level, the odds that the massive volume was selling is much greater than buying, and vice versa.
- You can see price trading in a range above that candle with massive volume. So far so good. But it hasn't broken above that range with a strong candle,yet. IF that happens, I will conclude that the massive volume was indeed buying and I can take a trade long after the breakout above the range. If you think about it logically, it makes sense. If the massive volume was selling, how can price then break out above? (Assuming it does) The only conclusion which makes most sense is that it was big buying (if price breaks out above). If price strongly breaks down below number 1, It means it likely was a sell order, in which case you can stay out of longs or go short.

Will be fun to see what happens. Looking at price action preceding all this, my instincts tell me its a buy order. But we need to wait to see a break above that consolidation range. Look at the other 2 big volume bars preceding this. Price hasn't managed to break below it, indicating those too were buying. You can actually see price come down in the zone to test supply and then sprang back up.

 

No worries - we all have to trade approaches that fit our personality.

This is how I would have traded it - noting that QAN isn't a great stock for an active trader and the setup is actually rubbish.



Here is a Wyckoff spring / Undercut and rally setup I did trade:

 

Thanks for your trading illustration. Also I agree it's less than optimal to trade and personally I wouldn't.



I will give my analysis on this chart when I can. It's so interesting how when I apply my analysis to PA on the chart, we come to the same conclusions through slightly different methods.

 

@TickerHound do you use VWAP in your trading? It was a game changer for me. I use wycoff for the structure, then use VWAP for identifying institutional orders then price action to confirm whether those orders are massive buys or sells to determine where and when to enter and exit.

 

To help other people like me:
VWAP is the calculation of the sum of price multiplied by volume and then divided by total traded volume.
If the price is above VWAP, it is a good intraday price to sell.

 

I saw that description on Google and tbh it's very misleading. When price is strongly above VWAP, it's actually a pretty good place to look for long positions as long as other factors are also met. Not a place to look for shorts or sell. That's how I see it anyways.

 

This picture does speak 1000 words!

 

Nah, I keep things very simple.

Brian Shannon is big on VWAP and pioneered some stuff. Think he wrote a book recently. See: How To Use The Anchored VWAP (AVWAP) – AlphaTrends

 

Simple works. I really only use volume and price action and a few moving averages. No indicators at all. They all lag and aren't necessary.

 

The purple line is VWAP. I'm not sure what to infer from this.
@Sackie & @TickerHound: What would you do each day purely based on the graph?