So the ole Golden Cross is about to take place on the beautiful Netflix chart. This is where a short-term average (usually 50 day) crosses above the long-term average (usually 200 day).
What this means is a collection of short term averages (50) now have a higher value than the collection of long term averages (200). That is a very good thing.
These averages tick up/down slowly and TREND – so it takes a while for them to reverse.
It takes an especially long time to reverse a 200 day moving average…In Netflix’ case it has a slight downward trend that appears about a month away from leveling out.
The 50 day moving average has spiked and is pointed straight up (currently $97.16)…Kind of a no-brainer but as long as the closing price is higher than $97.16 the line will continue to move up….i.e., TREND….Of course at the start of each trading day the new calculations come in…So perhaps, in Netflix’ case, for example, it will jump from $97.16 to around $97.40 on Monday.
You can use this golden cross setup in any application…Here are a couple examples:
- Your personal finances: If you find that your salary over 200 weeks (~4 years) is $57,500…and that your 50 week average (~1 year) is at $65,000…It is safe to assume that your personal finances are trending upward and you can predict with relative certainty that in the future your annual salary will be higher than $65,000.
- Weight loss: This is a reverse example (down is a good thing) but if you plot your weight over a period of time: 231, 232, 237, 235, 232, 225, 226, 220, 219, 216, 220, 205, 210, 206, 199, 185, 190, 187, 188…..And your longer term average (say, 228 pounds) is high…Against your short term average (205)…You can look back at your plots and see where they crossed…And at that point you can start to become even more confident that you will keep off the weight.
Anyways, here is the Netflix chart – strongly considering some $120-$150 call options that expire in 1-2 months…Netflix reports earnings on October 17th so that needs to be taken into consideration (could be a huge pop or drop depending on earnings). Call me a stock trading “conspiracy theorist” but I strongly believe that the chart can predict the earnings. With a golden cross happening a week before earnings I would suspect a strong report.
For what it’s worth, the last golden cross was in March 2015 – at $60/share…And guess what? By August 2015: $130 per share!