After Golden Cross, Mueller Water Products (MWA)'s Technical Outlook is Bright

After reaching an important support level, MUELLER WATER PRODUCTS (MWA) could be a good stock pick from a technical perspective. MWA 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 contrasts with a death cross, another widely-followed chart pattern that suggests bearish momentum could be on the horizon.

MWA has rallied 7% over the past four weeks, and the company is a #3 (Hold) on the Zacks Rank at the moment. This combination indicates MWA could be poised for a breakout.

The bullish case only gets stronger once investors take into account MWA's positive earnings outlook for the current quarter. There have been 2 upward revisions compared to none lower over the past 60 days, and the Zacks Consensus Estimate has moved up as well.

Investors may want to watch MWA 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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