The NYSE FANG+ Index, which represents highly traded growth stocks of technology-enabled companies, has fallen a whopping 18% from its peak in June 2018. Understandably, investors are showing concern for the resulting death cross—a technical chart pattern that formed when the index’s short-term moving average dropped below its long-term moving average at the beginning of this month (Exhibit 1).
However, a dispassionate look back at early 2016—the last time when a death cross took shape in the chart—reveals that FANG stocks bottomed before the 50-day moving average fell beneath the 200-day moving average. In other words, all the selling occurred before the death cross, suggesting that it might work better as a confirming buy signal for FANG stocks.
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