Should You Buy Tilly's (TLYS) After Golden Cross?

Tilly's, Inc. (TLYS) reached a significant support level, and could be a good pick for investors from a technical perspective. Recently, TLYS'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.

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

TLYS has rallied 165.9% over the past four weeks, and the company is a #2 (Buy) on the Zacks Rank at the moment. This combination indicates TLYS could be poised for a breakout.

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

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

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This article originally published on Zacks Investment Research (zacks.com).

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