After Golden Cross, CMS Energy (CMS)'s Technical Outlook is Bright

From a technical perspective, CMS Energy Corporation (CMS) is looking like an interesting pick, as it just reached a key level of support. CMS'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.

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.

Over the past four weeks, CMS has gained 6.7%. The company currently sits at a #3 (Hold) on the Zacks Rank, also indicating that the stock could be poised for a breakout.

The bullish case only gets stronger once investors take into account CMS's positive earnings outlook for the current quarter. There have been 1 upward revision 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 CMS 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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