Microchip Technology Incorporated (MCHP) is looking like an interesting pick from a technical perspective, as the company reached a key level of support. Recently, MCHP’s 50-day simple moving average crossed above its 200-day simple moving average, known as a “golden cross.”
Considered an important signifier for a bullish breakout, a golden cross is a technical chart pattern that’s formed when a stock’s short-term moving average breaks above a longer-term moving average; the most common crossover involves 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.
MCHP could be on the verge of a breakout after moving 16.9% higher over the last four weeks. Plus, the company is currently a #3 (Hold) on the Zacks Rank.
Once investors consider MCHP’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 10 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 MCHP for more gains in the near future.
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