This commentary originally appeared on Real Money Pro at 8:30 a.m. on May 16. Click here to learn about this dynamic market information service for active traders.
The "WannaCry" ransomware attack has focused investors' attention squarely on cybersecurity stocks. Names like FireEye (FEYE) , Fortinet (FTNT) , Proofpoint (PFPT) , Barracuda Networks (CUDA) and Palo Alto Networks (PANW) all gapped higher at yesterday's opening bell. Let's compare the charts of these stocks to see which ones have the best chance to build momentum from here.
Proofpoint appears to be the strongest of the group. This stock has been trapped between $70 and $87 for the past six months, but is on the verge of breaking out. Proofpoint is trading above its 50-day (blue) and 200-day (red) moving averages. The stock is less than 2% below its all-time closing high of $87.44 (dotted line), set last November. Grade: A.
FireEye reached its highest level in nine months yesterday; the stock has been gaining ground since mid-March. FireEye is also trading above its key 50-day and 200-day moving averages, which appear to be headed toward a bullish crossover (circled).
Unfortunately, there is some resistance in the area between $16.75 and $18.50. Notice how the stock was rejected from this area yesterday (shaded blue). FireEye will have to work through this area before it can make a clean break higher. Grade: B.
Fortinet is having a great year, climbing nearly 35% year to date. The stock has found strong support on its 50-day moving average (blue), getting several strong bounces from that indicator (arrows).
Fortinet briefly touched a one-year high yesterday morning, but like a battery that fails to hold a charge, it quickly surrendered its gains (shaded yellow). This tells us that traders sold this stock into strength yesterday, something that didn't occur with Proofpoint and FireEye. It could be mere profit-taking, but traders that follow this sector should pay attention to see if a pattern develops. Grade: B.
Palo Alto Networks has been drifting sideways since early March, but during that time the stock's MACD (moving average convergence divergence) indicator has been trending steadily higher. This creates a condition known as bullish divergence, and it suggests the stock will follow the indicator higher. Because of the large gap in Palo Alto's chart, the stock could rally to $150. Grade: B.
Like the stocks mentioned above, Barracuda Networks gapped nicely higher yesterday. Unfortunately, Barracuda shot right into an area of thick resistance between $22.50 and $24 (shaded blue). The stock's forward progress was halted when it collided with another obstacle, its 200-day moving average (red). Barracuda will have to break above $24 before it can be considered free of these entanglements. Grade: C+