Should You Buy Central Garden (CENT) After Golden Cross?

From a technical perspective, Central Garden & Pet Company (CENT) is looking like an interesting pick, as it just reached a key level of support. CENT's 50-day simple moving average crossed above its 200-day simple moving average, which is known as a "golden cross" in the trading world.

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.

This kind of chart pattern is the opposite of a death cross, which is a technical event that suggests future bearish price movement.

Shares of CENT have been moving higher over the past four weeks, up 12.9%. Plus, the company is currently a #2 (Buy) on the Zacks Rank, suggesting that CENT could be poised for a breakout.

The bullish case solidifies once investors consider CENT's positive earnings outlook. For the current quarter, no earnings estimate has been cut compared to 3 revisions 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 CENT for more gains in the near future.

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This article originally published on Zacks Investment Research (zacks.com).

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