After reaching an important support level, Cohu, Inc. (COHU Quick QuoteCOHU - Free Report) could be a good stock pick from a technical perspective. COHU 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.

COHU could be on the verge of a breakout after moving 33.3% higher over the last four weeks. Plus, the company is currently a #3 (Hold) on the Zacks Rank.

The bullish case solidifies once investors consider COHU'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.

Investors should think about putting COHU on their watchlist given the ultra-important technical indicator and positive move in earnings estimates.