Shares of cyber-security firm Palo Alto Networks Inc (NYSE:PANW) rallied 2.4% last Friday and by so doing gave the bulls renewed hope that a next leg higher may be in the cards sooner rather than later. Active investors and traders, take note.
In a sea of stocks trading near or at all-time highs, shares of Palo Alto Networks are trading nowhere near their all-time highs, while the company remains in the lucrative and growth-promising industry of cyber security. From where I sit, this offers an interesting bullish opportunity, particularly if we also take the constructive picture on the charts into account.
When I last discussed Palo Alto Networks on Sept. 5 I offered a bull case and said that PANW stock looked to be coiling up for a next leg higher on charts in multiple time frames. Although the stock has largely consolidated since then, the bull case in my eye remains just as much in place.
PANW Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear weekly chart, we see again that after putting in a double top in 2015, PANW stock proceeded to correct more than 40% and to this day remains stuck in a well-defined consolidation pattern that we could label as a large bull flag pattern (purple-dotted parallels).
Although the stock has not rallied an astonishing amount in 2017 thus far, it is now hugging the upper end of the multiyear consolidation channel. The simple bet here is that ultimately this stock breaks out of this channel to the upside.
Note also that although still in the channel, PANW stock is consolidating above its blue 100-week simple moving average.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Zooming in closer, we see that PANW stock’s daily chart is littered with notable up and down gaps. The up gap following the May 31 earnings report was followed by a multimonth consolidation phase, which in turn led to yet another up gap on the back of the Aug. 31 up gap. Since this second up gap, the stock has once again been consolidating in a smaller bull flag pattern, which is holding above the stock’s yellow 50-day simple moving average.
Last Friday’s rally popped the stock out of this latest bull flag pattern to the upside and could now provide traders with an entry to a next better upside target at $150, possibly followed by $160. Any major bearish reversal is a stop loss signal.
Check out Serge’s Daily Market Outlook for Oct. 2.
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