Cadence Design Systems, Inc. (CDNS Quick QuoteCDNS - Free Report) reached a significant support level, and could be a good pick for investors from a technical perspective. Recently, CDNS'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.

Shares of CDNS have been moving higher over the past four weeks, up 13.4%. Plus, the company is currently a #3 (Hold) on the Zacks Rank, suggesting that CDNS could be poised for a breakout.

Once investors consider CDNS's positive earnings outlook for the current quarter, the bullish case only solidifies. No earnings estimate has gone lower in the past two months compared to 2 revisions higher, and the Zacks Consensus Estimate has increased as well.

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