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Coach's Playbook Posted by Team Topstep February 15, 2022

Here Comes The Death Cross

Are you paying attention to the Nasdaq-100 (NQ) futures market? A few technical patterns and indicators are hinting at some potential long-term changes in the market! Have you heard of a technical pattern called the “Death Cross” before? Well, it’s not just a clever name because it’s a pretty serious bearish indicator. The death cross is a major reversal pattern where a short-term moving average crosses below a long-term moving average, and it tells us that market sentiment has shifted from bullish to bearish.

Funded Trader Shoutout!

Even though we’re talking about the dreaded death cross, today’s trading session (Tuesday, February 15, 2022) was anything but bearish. The NQ finished the day up close to 2.5% on relatively strong volume, so if there truly is a bearish shift taking place, this was not the day to fade the move if you’re a short-term trader.

As such, this week’s Funded Trader Shoutout goes to Armando N., who chose not to try picking tops and took the NQ futures for a ride higher to book over $3,000 in profits!

The Death Cross

Most technical analysts say that an accurate death cross occurs when the 50-day simple moving average crosses below the 200-day simple moving average. This is valid; the longer the timeframes you use, the more significant the pattern becomes.

The death cross is a long-term indicator, so, from a day trader perspective, jumping in and shorting a market as soon as you see it is happening might not be the wisest move. Significant shifts in market sentiment take time to play out, and there’s no telling if the pattern will continue once it gets started. Nevertheless, over the last 100 years, the death cross has been one of the most dependable indicators for forecasting changes in trends.

Trade Well!