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After Golden Cross, Rhythm Pharmaceuticals, Inc. (RYTM)'s Technical Outlook is Bright

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From a technical perspective, Rhythm Pharmaceuticals, Inc. (RYTM - Free Report) is looking like an interesting pick, as it just reached a key level of support. RYTM'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.

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 RYTM have been moving higher over the past four weeks, up 147.7%. Plus, the company is currently a #3 (Hold) on the Zacks Rank, suggesting that RYTM could be poised for a breakout.

The bullish case solidifies once investors consider RYTM's positive earnings outlook. For the current quarter, no earnings estimate has been cut compared to 3 revisions higher in the past 60 days. The Zacks Consensus Estimate has increased too.

Moving Average Chart for RYTM

With a winning combination of earnings estimate revisions and hitting a key technical level, investors should keep their eye on RYTM for more gains in the near future.

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