Aehr Test Systems (AEHR) reached a significant support level, and could be a good pick for investors from a technical perspective. Recently, AEHR's 50-day simple moving average broke out above its 200-day moving average; this is known as a "golden cross."
There's a reason traders love a golden cross -- it's a technical chart pattern that can indicate a bullish breakout is on the horizon. This kind of crossover is formed when a stock's short-term moving average breaks above a longer-term moving average. Typically, a golden cross involves the 50-day and the 200-day moving averages, 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.
AEHR could be on the verge of a breakout after moving 97.5% higher over the last four weeks. Plus, the company is currently a #2 (Buy) on the Zacks Rank.
The bullish case solidifies once investors consider AEHR's positive earnings outlook. For the current quarter, no earnings estimate has been cut compared to 1 revision higher in the past 60 days. The Zacks Consensus Estimate has increased too.
With a winning combination of earnings estimate revisions and hitting a key technical level, investors should keep their eye on AEHR for more gains in the near future.
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Aehr Test Systems (AEHR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).