We last looked at Palo Alto Networks (PANW) a month ago, a few days after its June upside price gap. The price action was not definitive and we summed our thoughts like this: "This limited price action is not really bullish, but prices would need to break down below $136 with heavier volume to weaken the picture."
With the benefit of hindsight, we can see that PANW has struggled the past month, slipping below $136 a number of times, but so far finding some minor support below $130. Let's dig deeper and see if we can propose what might come next.
In this updated daily bar chart of PANW, above, we see that prices have stalled in the past four to five weeks. During this short time span, the underlying indicators have weakened. Prices have been unable to sustain gains above the declining 200-day moving average line. Yes, the 50-day moving average line is still rising, but it is coming up fast and we could see a bearish break of that line in the next few weeks.
The On-Balance-Volume (OBV) line has declined during June, suggesting that sellers have been more aggressive, with more volume being traded on down days than up days. The trend-following Moving Average Convergence Divergence (MACD) oscillator has been in a take profits sell mode since early June.
In this weekly bar chart of PANW, above, the price gaps are gone, but a longer-term downtrend is visible. The slope of the 40-week moving average line has been bearish since late 2015.
There have been rallies above the 40-week average line, but they have not been long sustained. The weekly OBV line has had a bearish slope for over two years. The weekly MACD oscillator signaled a cover shorts buy signal in May, but has not crossed above the zero line.
In this Point and Figure chart of PANW (above) plotting percentage changes, we ignore gaps and volume. Notice the tightening trading range since June? A rally to $139.38 should be positive and a decline below $131.30 may result in increased selling.
Bottom line: the bar charts look more bearish than bullish, while the Point and Figure chart could break in either direction. To try to reduce whipsaws, I would follow strength above $140 and weakness below $129.