Oatly Group AB Sponsored ADR (OTLY) is looking like an interesting pick from a technical perspective, as the company reached a key level of support. Recently, OTLY's 50-day simple moving average crossed above its 200-day simple moving average, 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.
OTLY has rallied 29.7% over the past four weeks, and the company is a #3 (Hold) on the Zacks Rank at the moment. This combination indicates OTLY could be poised for a breakout.
The bullish case solidifies once investors consider OTLY's positive earnings outlook. For the current quarter, no earnings estimate has been cut compared to 2 revisions higher in the past 60 days. The Zacks Consensus Estimate has increased too.
Investors should think about putting OTLYon their watchlist given the ultra-important technical indicator and positive move in earnings estimates.
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Oatly Group AB Sponsored ADR (OTLY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).