After reaching an important support level, Datadog, Inc. (DDOG) could be a good stock pick from a technical perspective. DDOG recently experienced a "golden cross" event, which saw its 50-day simple moving average breaking out above its 200-day simple moving average.
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.
Over the past four weeks, DDOG has gained 8.8%. 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 solidifies once investors consider DDOG's positive earnings outlook. For the current quarter, no earnings estimate has been cut compared to 12 revisions higher in the past 60 days. The Zacks Consensus Estimate has increased too.
Investors should think about putting DDOG on their watchlist given the ultra-important technical indicator and positive move in earnings estimates.
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