After Golden Cross, Adeia (ADEA)'s Technical Outlook is Bright

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

A successful golden cross event has three stages. It first begins when a stock's price on the decline bottoms out. Then, its shorter moving average crosses above its longer moving average, triggering a positive trend reversal. The third and final phase occurs when the stock maintains its upward momentum.

A golden cross contrasts with a death cross, another widely-followed chart pattern that suggests bearish momentum could be on the horizon.

ADEA could be on the verge of a breakout after moving 47.9% higher over the last four weeks. Plus, the company is currently a #1 (Strong Buy) on the Zacks Rank.

The bullish case only gets stronger once investors take into account ADEA'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.

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