Did you like the way Palo Alto Networks (PANW) traded Friday? Watch ProofPoint (PFPT) on Tuesday. (September 01, 2017)
I want to look at Proofpoint ( NASDAQ:PFPT ). We will start here with HACK ( NYSEARCA:HACK ), this is the ETF for cyber security. You can see this had been working nicely, and then it has kind of drifted lower. A lot of those stocks just got really weak, but that was then, this is now. What we can see is, the support line was there, busted, now the stock is trading the ETF here, is trading in this range.
The takeaway from this is, that this looks like the extent of the downside move. It is right back up at the 50-day moving average, But when I look at these ETFs like this, as opposed to stuff like the SPY ( NYSEARCA:SPY ) or the DIA ( NYSEARCA:DIA ), some of the really heavily traded ETFs, this 50-day moving average doesn’t really mean anything to me. There is probably about four people, and hopefully, you are not one of them, that would be looking at the 50-day moving average as any kind of a reference point for actually trading. You have to do some research to find the companies that are actually in this ETF.
But, the fact that they are moving higher, you saw what happened with Palo Alto Networks ( NYSE:PANW ), a big gap. It is amazing how the stock is up 10 percent and now suddenly you are going to see people jumping on the band wagon saying to own it, which is fine if it moves up to 200.00. But you kind of want to say, “Where were you down at 135.00?” So we see this type of thing going. I want to look at the other cyber security stocks ( NASDAQ:PFPT ) and this would be one that I found, proof point. Not a random stock, a lot of folks watch this stock, trades a little less than half a million shares, you can see how this stock has been in a sideways trend for a while, which included downtrends and uptrends.
So this would be my suggestion here: Take a look at this, 20 percent of the float is short. On current average volume it would take over two weeks, eleven trading days for the shorts to cover. So this is POTENTIALLY a big breakout trade. I would suggest waiting to buy. Waiting for the stock to really make a break out here above $95.00. If it trades up into the green box, then you want to buy that stock. Until it does that you are kind of in jail.
The other way you could trade it would be, and this would be kind of an anticipatory thing. Over the next few weeks if the stock happened to trade back down then you could buy near the low-end of the box here. They are totally different trades. Totally different trades, the ticker is just the same. This is a breakout momentum buy. This is a pull back low-risk buy. And when I say low-risk, I mean low-risk because you place your stop just slightly below where you are buying. And then the only time you are stopped out is if the stock actually falls out of the box.
And here, by the way, when you are buying the stock on the breakout then you take your stop and put it in here, about right there. So you are not risking much money that way either. If the stock reverses and falls back into the box, well, you don’t want to long the stock that you got faked into buying, so you are out with a small loss. Either way, the idea is to get long the stock when there is a REASON for getting long, not yet, would be up here. You want to get long the stock when there is a reason for getting long and do it in a way that does not risk a lot of your hard earned trading capital. You can do that by setting a logical stop after a specific entry point where there is actually a logical foundation for the entry other than just, “Oh I got a hunch, I think I will buy a bunch.”