Should You Buy Datadog (DDOG) After Golden Cross?

Datadog, Inc. (DDOG) is looking like an interesting pick from a technical perspective, as the company reached a key level of support. Recently, DDOG's 50-day simple moving average crossed above its 200-day simple moving average, known as a "golden cross."

Considered an important signifier for a bullish breakout, a golden cross is a technical chart pattern that's formed when a stock's short-term moving average breaks above a longer-term moving average; the most common crossover involves the 50-day and the 200-day, 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 contrasts with a death cross, another widely-followed chart pattern that suggests bearish momentum could be on the horizon.

Shares of DDOG have been moving higher over the past four weeks, up 10.1%. Plus, the company is currently a #3 (Hold) on the Zacks Rank, suggesting that DDOG could be poised for a breakout.

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