RMR Group (RMR) Just Flashed Golden Cross Signal: Do You Buy?
Good things could be on the horizon when a stock experiences a golden cross event. How should investors react?
After reaching an important support level, The RMR Group Inc. (RMR) could be a good stock pick from a technical perspective. RMR 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.
This kind of chart pattern is the opposite of a death cross, which is a technical event that suggests future bearish price movement.
RMR has rallied 15.7% over the past four weeks, and the company is a #3 (Hold) on the Zacks Rank at the moment. This combination indicates RMR could be poised for a breakout.
The bullish case only gets stronger once investors take into account RMR's positive earnings outlook for the current quarter. There have been 2 upwards revisions compared to none lower over the past 60 days, and the Zacks Consensus Estimate has moved up as well.
Investors should think about putting RMR on their watchlist given the ultra-important technical indicator and positive move in earnings estimates.
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