Shares of cyber security company FireEye Inc (NASDAQ:FEYE), although higher by 45% for the year-to-date, look to have more upside ahead as the technical picture continues to improve. Traders and investors, take note.
Although the broader stock market continues to rise in these late innings of a cyclical bull market, rather than chasing the broader market higher, I have an easier time looking for industries with great growth prospects, such as cyber security.
As a side note, given that stocks are a highly correlated asset class, particularly within any given industry group or sector, through the lens of sound risk management it will be imperative to heed any strong bearish reversals in any of the cyber security stocks on the back of the upcoming earnings season … which for FEYE stock is still a few weeks away.
FireEye is set to report its next batch of earnings on Nov. 2.
FEYE Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Moving on to the charts, on the multiyear weekly chart we see that after a long “basing period,” FEYE stock in August created an important higher low above its yellow 50-week simple moving average, which was followed in early September with a clear breakout above the black diagonal line of resistance. This latter move has also pushed the stock back above its blue 100-week simple moving average for the first time since August 2015.
Over the past couple of weeks the stock has been consolidating in a constructive manner and now on the daily chart looks ready to make its next move higher.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that FEYE stock has seen a series of up-gaps since the spring of this year, as marked by the green arrows. The latest up-gap occurred in early September and led to a breakout above horizontal resistance. The past couple of weeks of price consolidation have taken place above this previous area of horizontal resistance and has taken the shape of a so-called bull flag pattern.
With Monday’s rally, FEYE stock has broken out of this bull flag pattern and barring any quick and meaningful bearish reversal could now be on its way to a next leg higher, albeit not necessarily in a straight line.
The next upside target here is $18, followed by $19. Any reversal of Monday’s rally is a stop loss signal for quick swing trades.
Check out Anthony Mirhaydari’s Daily Market Outlook for Oct. 3.
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