Palo Alto Networks (PANW) has cut a wide path, up and down over the past 12 months. Prices have tried to stabilize in the most recent two months but right now it doesn't look like PANW has done enough base-building to expect much follow-through from today's strength.
Sustained rallies typically happen when investors accumulate shares for a period of time before a breakout is seen. One of the ways of trying to recognize accumulation is from a rising On-Balance-Volume (OBV) line. Let's take a closer look at the OBV line on PANW and the other indicators to see if we should follow today's strength.
In this daily bar chart, above, we can see the big up-and-down moves for PANW. The last down move on PANW included a huge price gap. After this March gap prices saw-toothed lower through March and April. Prices are below the declining 50-day moving average line and downward sloping 200-day line.
The daily On-Balance-Volume (OBV) line has risen and fallen with the price action and since early March the line has chopped sideways to slightly lower. If shares have been aggressively accumulated in the past eight weeks it is hard to see that buying from the OBV line.
In the lower panel is the trend-following Moving Average Convergence Divergence (MACD) oscillator, which signaled a cover shorts buy signal in late March and is pointed back up to the zero line for a possible outright buy signal.
In this weekly chart of PANW, above, we can see that prices are below the declining 40-week moving average line. This condition has been in force for more than a year. The weekly OBV line has been declining the past two months, which is a weaker pattern than the daily line. The MACD oscillator on this timeframe is still pointed down in bearish territory.
Bottom line: Sometimes when you have a rally and volume kicks in to confirm the advance you can buy with some confidence. Unfortunately I cannot say that with PANW. Prices are up today but I did not see buying ahead of this pop. Can the rally continue? Sure, but I would like to see some sort of retest of the April lows before recommending a long position.