Latham Group (SWIM)'s Technical Outlook is Bright After Key Golden Cross

From a technical perspective, Latham Group, Inc. (SWIM) is looking like an interesting pick, as it just reached a key level of support. SWIM'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.

A golden cross contrasts with a death cross, another widely-followed chart pattern that suggests bearish momentum could be on the horizon.

SWIM could be on the verge of a breakout after moving 19.7% higher over the last four weeks. Plus, the company is currently a #3 (Hold) on the Zacks Rank.

The bullish case solidifies once investors consider SWIM's positive earnings outlook. For the current quarter, no earnings estimate has been cut compared to 0 revisions higher in the past 60 days. The Zacks Consensus Estimate has increased too.

Investors should think about putting SWIMon their watchlist given the ultra-important technical indicator and positive move in earnings estimates.

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

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