ScanSource (SCSC)'s Technical Outlook is Bright After Key Golden Cross

After reaching an important support level, ScanSource, Inc. (SCSC) could be a good stock pick from a technical perspective. SCSC 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.

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

SCSC has rallied 7.8% over the past four weeks, and the company is a #1 (Strong Buy) on the Zacks Rank at the moment. This combination indicates SCSC could be poised for a breakout.

Once investors consider SCSC'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 2 revisions higher, and the Zacks Consensus Estimate has increased as well.

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