It’s time for Box, Inc. (NYSE:BOX) investors to think outside the box and start looking at the potential upside in the company’s narrative.
A recent earnings event didn’t exactly sit well with BOX stock investors. Back in the tail end of February, the cloud services outfit announced better-than-forecast earnings. Unfortunately, the results were tainted by modestly below-view Q1 and 2020 full-year sales guidance, which sent BOX shares reeling by nearly 19%.
But first impressions can be deceiving. And as InvestorPlace’s Brent Kenwell wrote back in March, still solid, albeit disappointing growth and low valuation among its peer group do help make the case for BOX stock.
Similarly, on Wall Street where time can heal wounds and investors have a knack for forgiving or simply forgetting, BOX stock is in a unique position on the price chart to prove just that point.
BOX Stock Daily Chart
If one was to look at February’s reaction in BOX stock in isolation, you could say with good authority investors were more than a bit disappointed with the earnings report. And truthfully, BOX fooled more than a few bulls in front of the release.
Prior to the weak confessional, shares of BOX had recently broken out above trendline resistance following a six-month long correction. BOX stock also strongly hinted of continued upside with shares staging a second breakout from a smallish consolidation set against the 62% retracement level immediately in front of the release.
Unfortunately, the earnings reaction in BOX stock made the prior bullish price action ineffectual. The good news is at this point in time, there is a strong reason for investors to look outside the box on the price chart and be ready to act above it with a long BOX position.
For nearly two months, shares of Box have been trading laterally or in a rectangular, box-like congestion. With the pattern being established around the prior downtrend line, I’m optimistic the sideways price action in BOX stock is working to mend its past wounds and can be viewed as an elongated higher low formation.
Now it’s nearly time to purchase Box shares. This is especially true with BOX stock signaling an oversold stochastics crossover after its two failed attempts at rallying above earnings-driven price resistance.
Buying BOX Stock
I believe the third time is going to be the charm for BOX stock. For like-minded investors seeing a technical opportunity where once there was fear and loathing, I’d recommend buying BOX stock through $20.24. The entry represents a third attempt at rallying above resistance formed by the closing print in BOX following earnings.
Upon a breakout of BOX’s rectangular congestion, I’d expect the earnings gap has a high likelihood of getting filled over the next couple months. For money management purposes though, peeling off some exposure if shares rally in-between $22.20 – $22.75 looks smart. This price range incorporates the area in early February which initially lured in and trapped more than a few investors.
Finally, just in case that other bottom-line on the underside of the rectangular box is challenged once again, that’s a technical situation I’d rather avoid. As such, I’d set risk on this position at $1 and proceed to use a trailing stop from there.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.