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Should You Buy New Gold (NGD) After Golden Cross?

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

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 is the opposite of a death cross, another technical event that indicates bearish price movement may be on the horizon.

Shares of NGD have been moving higher over the past four weeks, up 20.5%. Plus, the company is currently a #3 (Hold) on the Zacks Rank, suggesting that NGD could be poised for a breakout.

Once investors consider NGD's positive earnings outlook for the current quarter, the bullish case only solidifies. No earnings estimate has gone lower in the past two months compared to 2 revisions higher, and the Zacks Consensus Estimate has increased as well.

Investors may want to watch NGD for more gains in the near future given the company's key technical level and positive earnings estimate revisions.

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Zacks Investment Research