American Eagle Outfitters, Inc. (AEO Quick QuoteAEO - Free Report) reached a significant support level, and could be a good pick for investors from a technical perspective. Recently, AEO'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.

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.

Over the past four weeks, AEO has gained 14.1%. The company currently sits at a #2 (Buy) on the Zacks Rank, also indicating that the stock could be poised for a breakout.

The bullish case only gets stronger once investors take into account AEO's positive earnings outlook for the current quarter. There have been 5 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 AEO on their watchlist given the ultra-important technical indicator and positive move in earnings estimates.