To say that shares of cyber attack prevention solutions company FireEye Inc (FEYE) had a wild ride in 2014 would be an understatement. While traders enjoyed many opportunities taking advantage of the stock’s volatility, the going since September has been much more mundane as the stock settled into a consolidation period. However, during the past three weeks, FEYE stock has wiggled itself into a more constructive pattern again that could see shares catapulted higher.
With cyber attacks increasingly becoming a daily reality, next-generation network protection solutions such as what FireEye provides are in good demand. From the recent attacks on Sony Corp (ADR) (SNE) to the daily attacks on government systems, the need to be better protected is real.
From a trader’s point of view, FEYE stock is theoretically always just one major cyber-security headline away from powering higher in a big way, which is why it’s so interesting.
On the news front, Sony was said to have hired FireEye in December after the well-publicized cyber attack it endured, and earlier this week it was rumored that activist investor Carl Icahn was looking to get involved with the company.
FEYE Stock Charts
Looking at the daily chart of FEYE stock that stretches back to its September 2013 initial public offering, we see the big “pop and drop” that FireEye went through in the first five months of 2014. In many ways, one could simply label this big move as a post-honeymoon, back-to-reality move that we so often see with growth stocks after their IPO. That’s why I always give a newly listed stock at least six to 12 months to find a rhythm.
Applying this reasoning to FEYE stock, we could say that the price action since May 2014 has put the stock into a much better space where technical support and resistance levels are clearly marked. On the chart above, we see that since last October, FEYE has developed a series of higher lows that by December led the stock to break past its upper diagonal resistance line (upper black line).
On the closer-up chart below, we see that after Thursday’s 7.15% rally, FEYE stock has moved back above both its eight- and 21-day simple moving averages (blue and yellow lines, respectively) and closed Thursday right back up at the lower diagonal resistance line from last July. Meanwhile, the stock’s momentum as represented by the Stochastic oscillator is also pushing back up, all of which points to a stock that looks giddy to break past the $33.50 resistance area.
If and when this takes place, FEYE stock could open up toward the $37.50-$38 area rather quickly.
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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.