Shares of network security firm Palo Alto Networks Inc (NYSE:PANW) rallied 3.68% on Tuesday and in doing so also overcame a technical hurdle that should now further embolden the bulls.
Before going over today’s trade idea in PANW stock, let me shine some light on a strategy that I learned from an old mentor and that has served me well over the years.
From a near-term swing-trading perspective earnings season can be tricky, particularly if trades are set up ahead of any given earnings report and in anticipation of profiting from a specific directional move in the stock in question. As such, particularly early on of earnings season, active investors may not find many trades they can do since most companies are soon to report earnings.
One way to get around this is to find companies that either report very late during earning season or report earnings completely outside of the regular schedule. Case in point, Palo Alto Networks, which reports late in earnings season … in this case not until Feb. 27, another 5 weeks from now.
PANW Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear weekly chart, we see that PANW stock has been finding technical resistance below the blue horizontal since early 2016.
At the lows in the spring of 2017, the stock began to base and staged a strong reversal higher. This technical base ultimately led to a rally that continues to this date and in fact now looks promising to make a next leg higher still.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, note that PANW stock has seen some choppy trading over the past few days. On Jan. 18 the stock staged a marginal breakout, which was followed by a down-day on Jan. 22 that likely faked-out some near-term bulls. Note however how the stock closed off its intraday lows, which then yesterday was followed by an up-gap and rally. The stock proceeded to close at the very upper end of the day’s trading range.
This formation I just described is what I refer to as a B2 reversal. My proprietary B2 Reversal Indicator alerted me to this price movement on Tuesday, and the stock now looks promising for a move to a next price target around the $170 area.
In case yesterday’s rally were to fail, a worst case and last resort stop loss could be placed at $150.
Check out Anthony Mirhaydari’s Daily Market Outlook for Jan. 24.
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