IO Biotech, Inc. (IOBT) Just Flashed Golden Cross Signal: Do You Buy?

After reaching an important support level, IO Biotech, Inc. (IOBT) could be a good stock pick from a technical perspective. IOBT recently experienced a "golden cross" event, which saw its 50-day simple moving average breaking out above its 200-day simple moving average.

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.

There are three stages to a golden cross. First, there must be a downtrend in a stock's price that eventually bottoms out. Then, the stock's shorter moving average crosses over its longer moving average, triggering a positive trend reversal. The third stage is when a stock continues the upward momentum 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.

IOBT has rallied 20.6% over the past four weeks, and the company is a #3 (Hold) on the Zacks Rank at the moment. This combination indicates IOBT could be poised for a breakout.

The bullish case solidifies once investors consider IOBT's positive earnings outlook. For the current quarter, no earnings estimate has been cut compared to 2 revisions higher in the past 60 days. The Zacks Consensus Estimate has increased too.

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