Goldman Sachs’s (GS) golden cross

The bullish “golden cross” pattern that surfaced in Goldman Sachs’s stock chart Wednesday could bode rather well for investors in the coming months, especially since the stock also appears to have reversed a five-year trend of underperformance against the S&P 500 at the same time.

A “golden cross” refers to when a stock’s 50-day moving average rises above the 200-day moving average. Many chart watchers say these bullish moving-average crossovers mark the spot that a short-term rally transitions to a long-term uptrend.

Although that’s the first golden cross in nearly two years, they aren’t too uncommon, as there have been seven previous appearances over the past 10 years. What’s relatively rare, however, is when they actually work as buy signals.

Of the previous seven, only the ones that appeared in September 2012, May 2009 and August 2005 provided good entry points to ride sustainable longer-term rallies. Those golden crosses preceded gains of 37% over five months, 38% over five months and 46% over eight months, respectively, before the stock started corrections of at least 10%.

A common theme of those three golden crosses were that Goldman’s shares were simultaneously ending long-term relative-performance downtrends when compared with the S&P 500.

And currently, RBC Capital technical analyst said he sees a “potential long-term trend reversal developing” in Goldmans’ stock relative to the S&P 500.