Shares of Internet traffic hardware company F5 Networks (FFIV) have consolidated the January-February rally during the past few months, but now, the next leg higher in FFIV stock is increasingly beginning to look like it’s just around the bend.
Before looking at the charts of F5 Networks, allow me to point out that this week’s holiday-shortened week also will come with a drop-off in volume as early as Wednesday afternoon as trades file out early for the long weekend.
For market participants, this means the going could get a little choppier this week as markets will be less liquid. While I’ll be sitting Thursday out, those
For my part, while Thursday will be best sat out, this week is thus best focused around the mid- and large-cap stocks where volume should at the margin be more stable than in their smaller-cap counterparts. Large-cap stocks start around a market capitalization of $10 billion, with midcaps ranging from $2 billion to $10 billion — so F5 Networks (and its market cap of around $8.5 billion) is in a good spot.
For F5 Networks, the news flow as of late has been rather light aside from an analyst initiating coverage here and there. Most recently, Buckingham Research initiated coverage on FFIV with a “neutral” rating but a $128 price target, which is roughly 15% higher than last Friday’s closing price. The next bigger catalyst for the stock is its earnings announcement, currently scheduled for July 23.
FFIV Stock Charts
Through the multiyear lens on the below weekly chart, note that FFIV stock over the past couple of years developed a good double bottom with its lows in August 2011 and again in June 2013. In January of this year, FFIV rallied nicely and broke past a few medium-term resistance areas before settling into a multimonth consolidation period.
All else being equal, however, this consolidation period looks to stand a good chance of resolving higher, and this also is supported by a rising relative strength index.
On the daily chart, note how FFIV found good support in April and May, which led to a push back in the direction of the early March highs. The longer the stock consolidates and pushes against the diagonal resistance line from March, the higher the chances of an eventual breakout and the more powerful that breakout is likely to be.
Last Friday, FFIV jumped 3.7%, and any sort of follow-through buying in coming days could quickly get the stock back to recent highs and eventually also past the resistance line.
Active traders and investors can consider either using last Thursday’s lows to lean against FFIV stock on the long side, or wait for F5 to break past $114 on a daily closing basis before getting long the stock for a move into the $120s as a first upside target area. Any drop below $106.50 area should be taken serious as the stock would need to reset itself again.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.