Market speculators should consider cybersecurity specialist SentinelOne (NYSE:S) in large part because rival CrowdStrike (NASDAQ:CRWD) messed up badly. It may be a while before CRWD’s stain is removed. In the meantime, S stock looks awfully intriguing.
Let’s look at the core fundamentals. As stated in its public profile, SentinelOne is a cybersecurity provider focusing on protecting an enterprise-level client’s endpoints, cloud workloads and identification credentials. It uses artificial intelligence and other advanced protocols to detect and address digital threats. Take a look at CrowdStrike’s profile: different words, same business.
Why is this important? CrowdStrike is reeling after its system outage forced massive disruptions across various industries. The company’s CEO must now testify to address the impact to critical infrastructures like air transportation and healthcare.
However, it’s not as if enterprises can just ignore endpoint security. With digital threats lurking everywhere and the average cost of data breaches rising, going without protection is ludicrous. In the head-to-head competition, CRWD is out and S stock is in.
Technicals Favor SentinelOne
As traders might imagine, the technical profile for S stock has turned bullish amid the CrowdStrike carnage. In the past five sessions from Monday’s close, SentinelOne gained over 6%. In the same period, CRWD suffered a catastrophic loss of more than 30%.
Beyond the historical price data is the recent chart action. According to Barchart, S stock on Monday pinged as a possible opportunity in its J-Hook screener. Essentially, the J-Hook is a phenomenon where a publicly traded asset engages in a see-saw action. At the end of this sinusoidal pattern, a decisive breakout may materialize.
As with any technical indicator, there are risks as no indicator is a perfect one. However, Barchart utilizes a nine-step criteria before identifying an asset as a J-Hook opportunity.
Based on Monday’s price action, the intraday high took S stock to $24.80. That’s a possible clue that the bulls will be aiming for resistance at $25, which represents a prior level of support. Also, $25 is a psychologically significant milestone, being a quarter of the way to $100.
Trade of the Day: Buy S Stock Long-Expiry Call Options
Given the fundamental tailwind and the technical J-Hook signal, there are many ways to play S stock. However, for the Trade of the Day, investors may consider long-expiry call options. Specifically, I’m looking at the 2025 Jan. 17 $25 call.
As stated earlier, the price action on Monday suggests that $25 represents bullish traders’ next logical target. Therefore, if one elects to go the options route, it’s important to find a contract with enough time for the trade to realistically pan out. Also, by going out the money (OTM), traders may be able to boost their profitability potential.
The main risk factor to be aware of is that technical support exists at $22. Therefore, S stock could fall back to this point. At the same time, CrowdStrike may lose market share as organizations lose confidence in it. That could be the fundamental fuel for SentinelOne to rise back to its prior highs.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
