Give Palo Alto Networks the Benefit of Doubt - For Now

 | May 19, 2017 | 11:35 AM EDT
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We discussed Palo Alto Networks (PANW) earlier this month. PANW was upgraded on the "Street" and prices are moving up smartly this morning, but let's review the indicators coming into today to see if a new course is being plotted.

In this daily bar chart of PANW, below, we can see that since early May PANW has been trading above the flat 50-day moving average line. Strength today could go a long way to establishing an uptrend. Strength above $124 would mean that we have the simple definition of an uptrend -- higher highs and higher lows. This uptrend is not yet significant in that it hasn't been tested much and its duration is short. The 200-day moving average line is still in a downtrend and well above the current market. 

The daily On-Balance-Volume (OBV) line has turned up a little but it is certainly not showing much in the way of aggressive buying. The daily Moving Average Convergence Divergence (MACD) oscillator has finally moved back above the zero line for an outright go long signal.

The "bigger picture" for PANW is in this weekly bar chart, below. Prices have been weakening since 2015 and have followed the declining 40-week moving average line to the downside. The weekly OBV line has declined in the past three months. The weekly MACD oscillator has turned toward a possible crossover, depending on the price action from here. A crossover for the MACD oscillator from below the zero line is considered by many to be a cover shorts buy signal.

In this Point and Figure chart of PANW, below, we can clearly see what is an upside breakout and what is a downside breakout. A rally to $122.47 is bullish and a decline to $111.98 would be bearish.

Bottom line: We are going to give PANW the benefit of the doubt and favor the upside. Strength above $122.47 will help improve the picture but the huge bearish gap (see chart 1 above) remains a significant obstacle.

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