Should You Buy Holley Inc. (HLLY) After Golden Cross?

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

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.

HLLY has rallied 84.3% over the past four weeks, and the company is a #2 (Buy) on the Zacks Rank at the moment. This combination indicates HLLY could be poised for a breakout.

The bullish case only gets stronger once investors take into account HLLY's positive earnings outlook for the current quarter. There have been 3 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 HLLY 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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