A “Death Cross” is a technical analysis chart pattern that occurs when a short-term moving average crosses below a long-term moving average. It is often associated with a potential bearish trend reversal in the price of an asset, particularly stocks. The Death Cross is considered a bearish signal by technical analysts and traders.

Here’s how the Death Cross is typically identified:

1. **Moving Averages:** The Death Cross involves two moving averages—a short-term moving average and a long-term moving average. Common choices are the 50-day and 200-day moving averages.

2. **Crossing Below:** The Death Cross occurs when the short-term moving average crosses below the long-term moving average on a price chart.

3. **Bearish Signal:** The crossing of the short-term moving average below the long-term moving average is interpreted as a bearish signal. It suggests that the recent price trends are weaker than the longer-term trends, indicating a potential shift towards a downtrend.

Traders and investors often use moving averages to smooth out short-term price fluctuations and identify trends. The Death Cross is seen as a bearish confirmation when it occurs after a prolonged uptrend. It is important to note that the Death Cross is not infallible, and false signals can occur. Therefore, traders typically use other technical indicators and analysis to confirm a potential trend reversal.

Conversely, there is a counterpart known as the “Golden Cross,” where a short-term moving average crosses above a long-term moving average. The Golden Cross is considered a bullish signal, suggesting a potential upward trend reversal.

It’s important to approach technical analysis, including patterns like the Death Cross, with caution and not rely solely on one signal for trading decisions. Market conditions can change, and multiple indicators should be considered in the context of a comprehensive analysis of an asset’s price behavior and overall market conditions. Additionally, risk management strategies are crucial to mitigate potential losses associated with trading decisions based on technical patterns.