Shares of the popular network software company F5 Networks, Inc. (NASDAQ:FFIV) remain lower by 12.5% year to date, but over the past few trading days have rejected the bears’ most recent selling attempt and giving bulls renewed hope for a rally.
The majority of U.S.-listed companies will be reporting earnings in coming weeks, which from a trading and active investing perspective has led me to slow down my trading activities as I patiently wait for stocks to report earnings and then look for opportunities to pounce on after the initial reaction to the earnings report has run its course.
F5 Networks too is scheduled to report its next batch of earnings in one week’s time from today, on earnings July 26.
As such, I am not looking to get ahead of the earnings report but am waiting to see if the strong bullish reversal of the past few days will be confirmed with ‘follow-through buying’ after earnings.
FFIV Stock Charts
To gain some perspective let’s first take a glance at the multiyear weekly chart. Here we see that although FFIV stock remains in an up-trend and supported by the lower blue arrow, the stock has largely been stuck in a consolidation range ever since topping out in early 2011. The series of higher lows since then is constructive but has yet to release the stock to the upside to fresh all-time highs on a more sustainable basis.
The blue 100 week simple moving average on the chart has over the years offered a good area of support and resistance and last week once again did its best to hold FFIV stock from falling into the abyss. Through this lens this moving average needs to be closely watched for if after earnings it still proofs to hold as support it could lead to the next leg higher for the stock.
On the daily chart, we see that last Friday, FFIV stock took a dip on the back of a downgrade from “overweight” to “neutral” from investment firm Piper Jaffray. Although the stock did close lower on the day it also closed well off its intraday lows, which was subsequently followed on Monday with follow-through buying, further rejecting the bears’ attempt to collapse the stock on the back of the analyst downgrade.
Strong bullish reversals such as this are important technical signals that can lead to some of the highest-probability setups, and for those unfamiliar, I’ll be hosting a special webinar Wednesday, July 26 for InvestorPlace readers to explain these signals and how to turn them into winning trades for monthly and quarterly income.
Note that this bullish reversal from late last week and early this week coincided right atop the aforementioned 100 week simple moving average as well as on horizontal support.
From here, should this support area around $124-$126 hold following the July 26 earnings report, then a good reward-to-risk trade to the upside toward $135 as an initial upside target and followed by $140-$145 could set up. Alternatively, should FFIV stock drop and break this area of support following the earnings report, it would negate the bullish setup but could for the more aggressive traders and active investors set up a trade to the downside toward $100 as a price target.
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