Arrow Electronics (ARW) Just Flashed Golden Cross Signal: Do You Buy?

Arrow Electronics, Inc. (ARW) reached a significant support level, and could be a good pick for investors from a technical perspective. Recently, ARW's 50-day simple moving average broke out above its 200-day moving average; this is known as a "golden cross."

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.

This kind of chart pattern is the opposite of a death cross, which is a technical event that suggests future bearish price movement.

ARW has rallied 31.2% over the past four weeks, and the company is a #1 (Strong Buy) on the Zacks Rank at the moment. This combination indicates ARW could be poised for a breakout.

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

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