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Should You Buy Sohu.com (SOHU) After Golden Cross?

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

Considered an important signifier for a bullish breakout, a golden cross is a technical chart pattern that's formed when a stock's short-term moving average breaks above a longer-term moving average; the most common crossover involves 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.

This kind of chart pattern is the opposite of a death cross, which is a technical event that suggests future bearish price movement.

Shares of SOHU have been moving higher over the past four weeks, up 10%. Plus, the company is currently a #3 (Hold) on the Zacks Rank, suggesting that SOHU could be poised for a breakout.

Looking at SOHU's earnings expectations, investors will be even more convinced of the bullish uptrend. For the current quarter, there have been 1 changes higher compared to none lower over the past 60 days, and the Zacks Consensus Estimate has moved up as well.

Moving Average Chart for SOHU
Moving Average Chart for SOHU

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


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