Shares of cyber security firm FireEye Inc (NYSE:FEYE) have spent most of the past month or so consolidating their early February rally and increasingly look ready to continue this rally sooner rather than later. That’s good news for active investors and traders, who can target a well-defined area of resistance that FEYE must overcome to start its next leg up.
With corporate and government cyber attacks becoming a daily occurrence, companies like FireEye Inc are being closely watched by investors because the growth prospects are promising, to say the least.
In its latest quarterly earnings report on Feb. 11, FEYE announced a narrower-than-expected loss and saw sales grow by nearly 150% year-over-year. With growth numbers like that, it’s also not surprising that takeover rumors are making the rounds regularly — just another reason to keep a close eye on FireEye.
FEYE Stock Charts
I shared a trade setup in shares of FEYE on Jan. 9 and discussed its technically tight and sound chart pattern. In early February, this pattern began to resolve to the upside and my price target in the $37.50-$38 area was reached rather quickly.
Looking at the first chart below, we see that FEYE stock overcame the black diagonal resistance line and has since also broken above its July 2014 highs. In the bigger picture, the double bottom with the lows from May and October 2014 is still firmly pushing FireEye stock higher.
On the daily chart below, we see that FireEye’s consolidation phase over the past month or so has taken the shape of what we could label as a bull flag pattern, which as the name indicates tends to resolve to the upside. Also note that the bottom of the bull flag around the $41 area also coincides with the red dotted line from the chart above, which is to say that the $41 area is an important support area for the near term, and any drop in FEYE below there would call into question the near-term bullish posture.
On the upside, we see that the stock’s 21-day simple moving average (yellow line), one of my favorite moving averages to gauge near-term directional pull, currently coincides with the top of the bull flag pattern.
If and when FEYE stock can push above the $44 area (preferably on a daily closing basis), then the stock would technically be breaking out of the bull flag pattern, cross back above its 21-day moving average and potentially begin its next up-leg into the high $40s.
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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.