The Golden Mode Trend Indicator
The Golden Mode Trend Indicator is an indicator using moving averages that I named because of the golden opportunities that stocks that are in a Golden Mode often produce. You can often buy or short stocks when the moving averages begin a Golden Mode and ride it for quite a long time to gain profits. The Golden Mode is a trend following system that will help you identify stocks that will give you lots of trading opportunities.
There are 3 elements in the Golden Mode Trend Indicator:
The reason why I have 3 different moving averages in the Golden Mode Trend Indicator is because I want to look at things in the short term (20 MA), medium term (50 MA) and the long term (200 MA). The best trades are made when multiple timeframes are in sync. So, we want to see 3 moving averages in sync to give us higher odds or success.
A stock is considered to be in a Bullish Golden Mode when it is above its
There are 3 elements in the Golden Mode Trend Indicator:
- The 20 period moving average
- The 50 period moving average
- The 200 period moving average
The reason why I have 3 different moving averages in the Golden Mode Trend Indicator is because I want to look at things in the short term (20 MA), medium term (50 MA) and the long term (200 MA). The best trades are made when multiple timeframes are in sync. So, we want to see 3 moving averages in sync to give us higher odds or success.
A stock is considered to be in a Bullish Golden Mode when it is above its
- rising 20 MA
- rising 50 MA
- rising 200 MA
In the chart above, you can see how CDE entered a Bullish Golden Mode. A stock that is in a Bullish Golden Mode tends to move higher. Sometimes moving higher fast and sometimes drifting slowly higher. Whether fast or slow, a stock that is in this mode have odds of moving higher. If you are holding a stock that is in a Golden Mode, you have more confidence that this stock will move higher. That's because, in all timeframes (short term, mid term and long term) the stock is healthy.
A strict interpretation of a Bullish Golden Mode is when the stock is above all its RISING moving averages.
But I have often found it useful to ignore the 200 MA criteria. That means, as long as the stock is above its rising 20 MA and 50 MA, that will be alright. The 200 MA does not need to curve up. It can be flat and I consider it to be in a Bullish Golden Mode. Of course, if the 200 MA is rising, that will be a bonus, but often, if you wait for the 200 MA to curve up, you might be missing out on a lot of move.
A strict interpretation of a Bullish Golden Mode is when the stock is above all its RISING moving averages.
But I have often found it useful to ignore the 200 MA criteria. That means, as long as the stock is above its rising 20 MA and 50 MA, that will be alright. The 200 MA does not need to curve up. It can be flat and I consider it to be in a Bullish Golden Mode. Of course, if the 200 MA is rising, that will be a bonus, but often, if you wait for the 200 MA to curve up, you might be missing out on a lot of move.
In the chart above, you can see how AMAT is in a Golden Mode. AMAT soon rose. If we follow a strict interpretation of the Bullish Golden Mode, then the stock would start to be in this mode around May. However, I would already consider the stock to be in this mode in March 2016. The 20 MA and 50 MA had a bullish cross and are rising. The 200 MA was flat. That was alright and it pointed to a further rise in AMAT. Although the stock dropped below its 20 and 50 MA in May, it quickly reversed and moved higher.
In the chart above you can see how AMZN formed the perfect Bullish Golden Mode. The stock already had a rising 200 MA and this was long term healthy. The stock had a bullish 20 MA cross 50 MA in March. Then the 2 shorter MAs began rising. AMZN entered a perfect Bullish Golden Mode and look how the stock rose from there.
Okay, after looking at a few charts, what can the Bullish Golden Mode do for you?
In the chart below, you can see the 60 min chart of QQQ.
Okay, after looking at a few charts, what can the Bullish Golden Mode do for you?
- It tells you the health of a stock. A stock in a Bullish Golden Mode is very healthy
- It tells you the bias for the stock. A stock in a Bullish Golden Mode has an upside bias
- It tells you the trend of the stock. A stock in a Bullish Golden Mode is in an uptrend and likely to continue higher
- You can find long entries when a stock is in a Bullish Golden Mode. You either buy dips or buy uptrends
- You can use it to analyze the major indexes to form a bias for the stock market
In the chart below, you can see the 60 min chart of QQQ.
QQQ entered into a Bullish Golden Mode in July 2016 and look how it rose. There were dips of course but the ETF continue to rise and overcome resistance. I use the 60 min charts a lot to analyze major indexes and you can join me on this journey of looking at what the markets are doing and where they may likely go by visiting my Daily Stock Market Analysis 2016 everyday.
When a stock or index is in a Bullish Golden Mode whether in daily charts, weekly charts or 60 min charts, you do not want to ignore them. The odds of them moving higher is very good. When you see a stock that is in a Bullish Golden Mode, you start to look to buy dips and breakouts. Below, you can see ALLY and TDC in a 60 min Bullish Golden Mode. Look how they rose nicely higher.
When a stock or index is in a Bullish Golden Mode whether in daily charts, weekly charts or 60 min charts, you do not want to ignore them. The odds of them moving higher is very good. When you see a stock that is in a Bullish Golden Mode, you start to look to buy dips and breakouts. Below, you can see ALLY and TDC in a 60 min Bullish Golden Mode. Look how they rose nicely higher.
The Bearish Golden Mode
The Golden Mode Trend Indicator is dynamic because you can also use it to spot stocks that are about to start of a new downtrend. No matter what timeframe you are looking at, the Bearish Golden Mode Trend Indicator will help you to spot stocks that will likely make a new downtrend in that timeframe.
For a stock to be in a Bearish Golden Mode, you need it to be:
For a stock to be in a Bearish Golden Mode, you need it to be:
- Below its declining 20 MA
- Below its declining 50 MA
- Below its 200 MA
In the chart above, you can see how AAL entered into a daily Bearish Golden Mode. Once it was in this mode, look at how much the stock dropped. If you were holding this stock, it would be wise for you to sell it.
Similarly in the chart above, you can see how AAPL entered into a Bearish Golden Mode. Although this is a favorite stock among many investors, you should stay away from this stock while it was still in a Bearish Golden Mode.
When does a Bearish Golden Mode ends?
Answer: When the stock cross above its 20 MA and 50 MA.
On the other hand, when does a Bullish Golden Mode end?
Answer: The reverse of bearish of course. Lol... Yes, when the stock crosses below its 20 MA and 50 MA.
The Golden Mode is very dynamic and when you learn it, you can navigate a bullish trend or a bearish trend. That's the beauty of this trend following system.
When does a Bearish Golden Mode ends?
Answer: When the stock cross above its 20 MA and 50 MA.
On the other hand, when does a Bullish Golden Mode end?
Answer: The reverse of bearish of course. Lol... Yes, when the stock crosses below its 20 MA and 50 MA.
The Golden Mode is very dynamic and when you learn it, you can navigate a bullish trend or a bearish trend. That's the beauty of this trend following system.
The chart above looks familiar right?
One thing that is different is the timeframe. RDC formed a Bearish Golden Mode in the 60 min charts. Look how it fell from there.
The Bullish Golden Mode and Bearish Golden Mode Trend Indicator works very well to form a bias in a stock or index when you combine it with the knowledge of market stages. Read about it in The 4 Stages Every Stock And Market Goes Through.
One thing that is different is the timeframe. RDC formed a Bearish Golden Mode in the 60 min charts. Look how it fell from there.
The Bullish Golden Mode and Bearish Golden Mode Trend Indicator works very well to form a bias in a stock or index when you combine it with the knowledge of market stages. Read about it in The 4 Stages Every Stock And Market Goes Through.
Longer Term Analysis For Investors
I mentioned that the Golden Mode does not work very well in daily chart of major indexes because of the lack of sustainable daily trend in the major indexes. Stock indexes like the S&P 500 index tend to move up then move down a bit and then move slowly up. Perhaps the reason is because of the heavy selling and buying by big players and institutions who move in and out of stocks slowly. For that reason, commodities tend to trend better than stock indexes.
However, when you use the Golden Mode in the weekly charts, it can be a very excellent way for long term investors to know when to buy the dips and breakouts.
However, when you use the Golden Mode in the weekly charts, it can be a very excellent way for long term investors to know when to buy the dips and breakouts.
In the chart above, you can see how from around 2012 to 2015, this was a "buy the dip" markets for investors. Anytime the market dropped, smart investors knew this was a great time to buy stocks at a cheaper price and ride it higher. The weekly Bullish Golden Mode in the S&P 500 index can give us the confidence that buying dips and breakouts in our stocks will have much better success.
The S&P 500 index dropped below its weekly 20 MA and 50 MA in 2015 but in 2016, the index once again entered into another Bullish Golden Mode. If the Bullish Golden Mode is correct, we may see another period of rising stock market.
This article is part of the series on How To Trade Stocks, A Step By Step Guide. To learn more, click on the link.
The S&P 500 index dropped below its weekly 20 MA and 50 MA in 2015 but in 2016, the index once again entered into another Bullish Golden Mode. If the Bullish Golden Mode is correct, we may see another period of rising stock market.
This article is part of the series on How To Trade Stocks, A Step By Step Guide. To learn more, click on the link.