From a technical perspective, Sensient Technologies Corporation (SXT) is looking like an interesting pick, as it just reached a key level of support. SXT'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.
Golden crosses have three key stages that investors look out for. It starts with a downtrend in a stock's price that eventually bottoms out, followed by the stock's shorter moving average crossing over its longer moving average and triggering a trend reversal. The final stage is when a stock continues the upward climb 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.
Over the past four weeks, SXT has gained 23%. The company currently sits at a #2 (Buy) on the Zacks Rank, also indicating that the stock could be poised for a breakout.
The bullish case solidifies once investors consider SXT'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.
Investors should think about putting SXTon their watchlist given the ultra-important technical indicator and positive move in earnings estimates.
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Sensient Technologies Corporation (SXT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).