Microsoft (MSFT) Just Flashed Golden Cross Signal: Do You Buy?

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

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 is the opposite of a death cross, another technical event that indicates bearish price movement may be on the horizon.

Over the past four weeks, MSFT has gained 12%. The company currently sits at a #3 (Hold) on the Zacks Rank, also indicating that the stock could be poised for a breakout.

The bullish case only gets stronger once investors take into account MSFT's positive earnings outlook for the current quarter. There have been 13 upward revisions compared to none lower over the past 60 days, and the Zacks Consensus Estimate has moved up as well.

Given this move in earnings estimates and the positive technical factor, investors may want to keep their eye on MSFT 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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