In his first Executive Decision segment of "Mad Money" Monday, host Jim Cramer spoke with Nikesh Arora, chairman and CEO of Palo Alto Networks Inc. (PANW) , a cybersecurity company that just posted an earnings beat on an 18% increase in sales and issued strong guidance.
Arora said Palo Alto Networks has been transforming itself from a single-product company into one that now offers three different platforms for its customers. He said investors have been focusing on the declining need for office firewalls and are failing to see that as companies move to the cloud and work from home they will need integrated solutions for all three places, which is what Palo Alto now provides.
Palo Alto Networks also is expanding into new services with the recently announced acquisition of Crypsis Group.
Let's expand our look into the charts and indicators of PANW.
In this daily bar chart of PANW, below, we can see that prices have more than doubled from its mid-March pandemic low. PANW is trading above the rising 50-day moving average line and above the rising 200-day moving average line. A bullish cross of these two averages can be seen in June. The trading volume has been shrinking since February but the On-Balance-Volume (OBV) line has continued to rise, telling us that buyers of PANW have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator has been above the zero line since April and is pointing up to a fresh buy signal.
In this weekly bar chart of PANW, below, we can see the past three years of trading activity. Prices have been stuck in a large sideways consolidation pattern but we can see that this year brought us an upside breakout. The height of the pattern is roughly $90, and when that is added to the breakout at $250 it gives us a potential price target of $340 to start. Prices are above the rising 40-week moving average line. The weekly OBV line is constructive and the MACD oscillator on this longer time frame is very bullish.
In this daily Point and Figure chart of PANW, below, we can see that the software is projecting a potential upside price target in the $323 area.
Bottom line strategy: The three charts above are strong and the indicators are bullish. A dip in price Monday and Tuesday could be an attractive entry point for new longs. Aggressive traders could buy short-term weakness, risking a close below $245 for now. The $323-$340 area is our next price objective.
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