Golden Cross in S&P CNX Nifty: Bullish Technical Formation

March 13, 2012

Golden Cross - In nutshell

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A third force, developing itself more slowly, becomes even more potent than the rest: the power of "Golden Cross"
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The Golden Cross occurs when the 50-day moving average of the closing prices of the underlying index crosses above the 200-day moving average. This event is considered by some to indicate the end of a "down" trend and the start of the new "up" trend (i.e. a "good" market condition). The Dead Cross occurs when the 50-day moving average of the closing prices of the underlying index crosses below the 200-day moving average. This event is considered by some to indicate the end of the "up" trend and the start of the new "down" trend (i.e. a "bad" market condition). Moving average crossover systems are best suited for trend identification and trend-following purposes, not for prediction. The system is designed to dynamically adjust the exposure in an underlying index according to the occurrence of the Golden Cross and the Dead Cross signals. For instance, the strategy of buying the S&P CNX Nifty at the time of each golden cross and holding until the next death cross will help mint decent amount of appreciation.

Expect S&P CNX Nifty to heighten above the Resistance Zone of "6338-6357" in the next one to one and a half year time

Dharmesh Patel dharmesh.patel@emkayglobal.com +91 22 6612 1242

Emkay Global Financial Services Ltd

"Golden Cross

Moving averages; at its best

Moving averages; at its best

S&P CNX Nifty

Golden Cross

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Golden Cross

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Golden Cross with a Trendline break have occurred on four occasions with an average return of 47%

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Golden Cross

Golden Cross

2500

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Golden Cross

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Golden Cross
2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Golden Cross signal accompanied by a Trendline break.

Since 2003, there were 4 occasions in the past where, Golden Cross signals have occurred with a trendline breakout and none of the time this strategy has seen a downfall. This is the fifth occasion where "History is repeating itself". Considering the average return of 47% until the next Dead Cross signal, we feel that taking an 'All-in' bet is a practical approach. The point is that you need to be greedy at some point of time. Fortunately! This is the right time.
Date of Golden Cross signal 7th July, 2003 27th Oct, 2004 16th Oct, 2004 26th May, 2009 12th Mar, 2012 Date of Dead Cross reversal 18th June, 2004 7th Aug, 2006 28th Mar, 2008 7th Mar, 2011 ?

Close 1140.55 1783.85 3349.2 4107.9 5357.15

Close 1491.2 3152.25 4950.3 5465.45 ?

Difference 350.65 1368.4 1601.1 1357.55 ?

% returns 30.74394 76.71049 47.80545 33.0473 ?

Emkay Research

13 March 2012

Moving averages; at its best

Golden Cross

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Emkay Research

13 March 2012

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