STMicroelectronics N.V. (STM) reached a significant support level, and could be a good pick for investors from a technical perspective. Recently, STM’s 50-day simple moving average broke out above its 200-day moving average; this is known as a “golden cross.”
A golden cross is a technical chart pattern that can signify a potential bullish breakout. It’s formed from a crossover involving a security’s short-term moving average breaking above a longer-term moving average, with the most common moving averages being the 50-day and the 200-day, since bigger time periods tend to form stronger breakouts.
There are three stages to a golden cross. First, there must be a downtrend in a stock’s price that eventually bottoms out. Then, the stock’s shorter moving average crosses over its longer moving average, triggering a positive trend reversal. The third stage is when a stock continues the upward momentum to higher prices.
A golden cross contrasts with a death cross, another widely-followed chart pattern that suggests bearish momentum could be on the horizon.
Shares of STM have been moving higher over the past four weeks, up 12.1%. Plus, the company is currently a #2 (Buy) on the Zacks Rank, suggesting that STM could be poised for a breakout.
Once investors consider STM’s positive earnings outlook for the current quarter, the bullish case only solidifies. No earnings estimate has gone lower in the past two months compared to 2 revisions higher, and the Zacks Consensus Estimate has increased as well.
With a winning combination of earnings estimate revisions and hitting a key technical level, investors should keep their eye on STM for more gains in the near future.
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