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By the sound of it, the “death cross” would seem a circumstance that investors should avoid. To be fair, that such a pattern emerged is a clear warning sign that not all is well with the underlying asset or enterprise. Nevertheless, because the death cross is a heavily monitored phenomenon, swing traders have an opportunity to leverage it for potentially quick profits.

Let’s start with the definition. A death cross describes a situation where a shorter-running moving average slips beneath a longer-running one, typically the 50-day moving average intersecting below the 200 DMA. Based on mathematical deduction, a publicly traded security would need to incur sustained downside for this negative cross to materialize.

On a fundamental note, the death cross is a warning — often the first sign of a severe downcycle or, in the worst-case scenario, a bear market.

At the same time, context matters. Some securities, when they flash the death cross, offer an intuitive interpretation; a negative intersection implies a forward risk of further crimson ink. On the other hand, some securities deliver a counterintuitive flair. In such cases, a death cross could be a buying opportunity.

Barchart Premier members have unfettered access to the platform’s screeners, including the Death Cross. This screener identifies securities that just printed the pattern — or is about to. By analyzing the price history of the stocks in question (which is another benefit of Barchart Premier), one can analyze the probability of trading this technical pattern.

Here’s a quick look at three stocks flashing the death cross — and more importantly, how you can profit from it.

HanesBrands (HBI)

A clothing company, HanesBrands (HBI) is hardly an exciting enterprise. At the same time, the company provides everyday necessities at (relatively) reasonable prices. On that note, HBI stock should be a steady contributor to one’s portfolio. Unfortunately, the underlying enterprise’s latest earnings report broadcasted headwinds in the form of declining demand.

Not surprisingly, the Barchart Technical Opinion rates HBI stock as an 88% Strong Sell. Analysts rate shares a consensus Hold, with the only directly positive rating a lone Strong Buy; that’s hardly encouraging. On Friday, HBI stock closed at $5.77, losing 1.7% and officially printing the death cross.

Still, if you’re the speculative type, you may want to consider buying the pain. Between September 2015 and October 2021, there have been five death crosses. One month later, HBI stock swung higher four times, resulting in a contrarian success ratio of 80%.

History isn’t guaranteed to repeat, to be clear. Nevertheless, if you want to play the numbers game, the average one-month return following the death cross (assuming the positive scenario only) is 5.76%. Therefore, buying the $6 out-the-money (OTM) call expiring May 16 could be an intriguing wager.

Whirlpool (WHR)

Another enterprise that doesn’t exactly get the pulse racing, Whirlpool (WHR) is nevertheless an important component of the broader consumer economy. As one of the largest manufacturers of home appliances in the world, it’s a mainstay of millions of households. At the same time, economic difficulties have caused families to reduce their spending, which doesn’t help matters.

Indeed, the evidence is in the print. Since the beginning of the year, WHR stock lost almost 22% of equity value. Over the past 52 weeks, it’s down nearly 25%. To be fair, WHR hasn’t officially marked the death cross yet. Nevertheless, due to the sharp losses the security has incurred — especially in January of this year — the dubious milestone is practically guaranteed to arrive soon.

Between July 2015 and September 2023, Whirlpool stock printed seven death crosses. One month later, WHR swung higher four times, resulting in a contrarian success ratio of 57.14%. That might not be enough to warrant a directional wager.

However, average upside returns came out to 6.31% while average downside returns sat at 13.53%. This translates to an upper target of $95.16 and a lower target of $77.40. Thus, aggressive speculators may consider a 75/80—95/100 short iron condor for the options chain expiring May 16.

Cinemark (CNK)

Including cineplex operator Cinemark (CNK) hurts because I’ve previously been supportive of the business. In years past, I stated that while the searing popularity of streaming platforms represented competition for the box office, Cinemark could also benefit from the social experience that the movies provide. There’s a classic romanticism here and this framework has resulted in upside for prior speculators.

Fast forward to the present juncture and circumstances look much different. Since the January opener, CNK stock dropped almost 20%. To be fair, over the past 52 weeks, CNK is up almost 35%, which is relatively healthy. Still, the risk is that the current negative momentum could erase these gains, resulting in further pain for shareholders.

Not shockingly, CNK stock just printed the death cross. Between September 2015 and December 2023, there have been eight death crosses, with only three instances of CNK rising one month later. This translates to a woeful contrarian success ratio of 37.5%.

If you want to play the numbers game, you got to go bearish. Realistically, the trade to consider is the 25/24 bear put spread for the options chain expiring May 16.