Shares of FireEye Inc (NASDAQ:FEYE) rallied nicely last week, so much so that they closed the week at levels last seen in late 2015. Through the lens of technical analysis the stock is forming a major ‘base’ out of which it now appears ripe to rally. Traders and active investors could take advantage of a stock that is coiling up for a move higher.
Personally I continue to like internet security stocks as a theme through the intermediate-to-longer-term lens given the likely still increasing demand for their products. While not all stocks in this niche segment may shine, some could also become acquisition targets and thus benefit shareholders.
Through the lens of technical analysis the below analysis of FEYE stock is a classic case where multi-time-frame analysis is coming in handy for perspective as well as for narrowing in on a defined reward to risk trade setup.
FEYE Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Starting off with the multiyear weekly chart, we see that since the stock began reaching exhausting downside momentum in late 2015 and coming into early 2016, it has largely trotted sideways in a well defined range. Note that by late 2016 and the first quarter of 2017 the stock attempted to break down further but just didn’t have the strength any longer to do so.
By late April 2017, FEYE stock showed strength as the stock gapped higher and rallied following an earnings report. The stock then slipped into another choppy range for the remainder of the year.
With last week’s rally, the stock finally managed to overcome its 2016 and 2017 highs on a weekly closing basis, and that is making me sit up and take notice.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see last week’s 8% rally even better. Note that in late March, FEYE stock found support at its yellow 50-day simple moving average. On April 4, the stock staged a classic buy signal as per my B2 Reversal Indicator.
By midweek last week, the stock pushed out of a bull flag pattern (black parallels) and ultimately closed the week above the aforementioned multiyear trading range, i.e above the blue band.
From here, although I don’t expect the stock to ascend in a parabolic fashion, the next upside target becomes the $20 area and ultimately could see well into the mid $20s. Risks always increase through earnings reports, which is to say that any swing trades on the long side would be wise to be clipped in size through the next earnings report in May.
There are various strategies to take advantage of this current setup in FEYE stock and generate trading income. On Tuesday I will discuss my favorite such strategy in a special webinar for InvestorPlace readers; Using Implied Volatility for Steady Income. Register here.
Check out Serge’s Daily Market Outlook for April 16.
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