As a rule of thumb, retail investors tend to avoid publicly traded securities that have flashed the dreaded death cross. A phenomenon where the 50-day moving average crosses below the 200 DMA, the intersection points to sustained weakness for the target security. At the same time, there’s a contrarian philosophy that suggests that because the bearish pressure may have been fully digested, the subsequent moves could be bullish.
Such sentiments align with legendary investor Warren Buffett’s commonly cited aphorism: “Be fearful when others are greedy, and greedy when others are fearful.” This is great and all but it raises an important question — how do you know which ideas are worth pursuing and which ones to avoid?
