Preferred Bank (PFBC)'s Technical Outlook is Bright After Key Golden Cross

From a technical perspective, Preferred Bank (PFBC) is looking like an interesting pick, as it just reached a key level of support. PFBC'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.

Golden crosses have three key stages that investors look out for. It starts with a downtrend in a stock's price that eventually bottoms out, followed by the stock's shorter moving average crossing over its longer moving average and triggering a trend reversal. The final stage is when a stock continues the upward climb 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.

Shares of PFBC have been moving higher over the past four weeks, up 13%. Plus, the company is currently a #3 (Hold) on the Zacks Rank, suggesting that PFBC could be poised for a breakout.

Once investors consider PFBC's positive earnings outlook for the current quarter, the bullish case only solidifies. No earnings estimate has gone lower in the past two months compared to 4 revisions higher, and the Zacks Consensus Estimate has increased as well.

With a winning combination of earnings estimate revisions and hitting a key technical level, investors should keep their eye on PFBC 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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