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Should You Buy iQIYI, Inc. Sponsored ADR (IQ) After Golden Cross?

From a technical perspective, iQIYI, Inc. Sponsored ADR (IQ) is looking like an interesting pick, as it just reached a key level of support. IQ'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.

A golden cross is a technical chart pattern that can signify a potential bullish breakout. It's formed from a crossover involving a security's short-term moving average breaking above a longer-term moving average, with the most common moving averages being the 50-day and the 200-day, since bigger time periods tend to form stronger breakouts.

A successful golden cross event has three stages. It first begins when a stock's price on the decline bottoms out. Then, its shorter moving average crosses above its longer moving average, triggering a positive trend reversal. The third and final phase occurs when the stock maintains its upward momentum.

A golden cross is the opposite of a death cross, another technical event that indicates bearish price movement may be on the horizon.

Over the past four weeks, IQ has gained 56.6%. 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 IQ's positive earnings outlook for the current quarter. There have been 2 upwards revisions compared to none lower over the past 60 days, and the Zacks Consensus Estimate has moved up as well.

Moving Average Chart for IQ
Moving Average Chart for IQ

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

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