Should You Buy Five Below (FIVE) After Golden Cross?

After reaching an important support level, Five Below, Inc. (FIVE) could be a good stock pick from a technical perspective. FIVE recently experienced a "golden cross" event, which saw its 50-day simple moving average breaking out above its 200-day simple moving average.

A golden cross is a technical chart pattern that can signify a potential bullish breakout. It's formed from a crossover involving a security's short-term moving average breaking above a longer-term moving average, with the most common moving averages being the 50-day and the 200-day, 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 is the opposite of a death cross, another technical event that indicates bearish price movement may be on the horizon.

Shares of FIVE have been moving higher over the past four weeks, up 17.4%. Plus, the company is currently a #2 (Buy) on the Zacks Rank, suggesting that FIVE could be poised for a breakout.

The bullish case solidifies once investors consider FIVE'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 may want to watch FIVE for more gains in the near future given the company's key technical level and positive earnings estimate revisions.

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

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