Palo Alto Networks (PANW) made a low in November and a pullback and retest in late December. Our favorite technical indicators have improved over the last three months so traders can add to longs.
Let's look at the charts and indicators for targets and an appropriate stop level with the stock trading higher this morning on the back of two upgrades.
In this daily bar chart of PANW, below, we can see a positive-looking chart before today's price strength. Prices show a base pattern from late October into January. PANW is above the rising 50-day moving average line and just closed above the flat to slightly rising 200-day line.
The daily On-Balance-Volume (OBV) line shows a decline from September to late November telling us that sellers were more aggressive, but the line has improved since early December telling us that buyers have turned more aggressive.
The trend-following Moving Average Convergence Divergence (MACD) gave a cover shorts signal in November and earlier this month crossed above the zero line for an outright go long signal.
In this weekly bar chart of PANW, below, we can see the price action of the past three years. The pullback in late 2018 to around $160 is a retest of former resistance from 2016. Prices closed above the flat 40-week moving average line and the slope of the line could turn up soon if the price gains continue.
The weekly OBV line shows a bullish rise from the middle of November and the MACD oscillator has crossed to the upside for a cover shorts buy signal.
In this Point and Figure chart of PANW, below, we can see an upside price target of $224.15 being projected. The chart does not show a lot of resistance above $224 so further gains are possible.
Bottom line strategy: PANW displays a number of bullish signals on the charts above. Traders should be buyers on shallow dips and on strength to new highs for the move up. Our first target is the $224 area. Risk a close below $190 for now.