For his third and final Executive Decision segment of "Mad Money" Thursday, Jim Cramer checked in Nikesh Arora, CEO of Palo Alto Networks Inc. (PANW) , the cybersecurity company that on Thursday posted a third-quarter bottom-line beat with billings up 24%.
Arora said PANW saw the trends of digital transformation and the cloud coming for a long time ago and the pandemic is only accelerating those trends. Companies need integrated solutions that cover the home and the office, which is what Palo Alto Networks provides.
Let's check out the company's charts.
In this daily bar chart of PANW, below, we can see that prices were especially weak in February and March. It's hard to miss the huge downside price gap in late February. Prices made a "V" bottom and have rallied back to near the highs of November-February. Prices on Thursday made a possible key reversal with a new high for the move up and then a lower close. Volume was not heavy, so this may only be an outside day and a near reversal. I will be watching the price action a lot closer here on Friday.
PANW is above the bottoming 200-day moving average line and well above the rising 50-day moving average line. The On-Balance-Volume (OBV) line has been strong from the middle of March and has made a new high over the February peak. Buyers of PANW seem to be very aggressive. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line and still rising.
In this weekly bar chart of PANW, below, we see a mixed picture. In some ways the price action in 2019 looks like a topping pattern. The sharp decline in February and March of this year, with the lows of 2018 being broken, can give you that feeling. PANW has rallied back sharply since the middle of March. Prices are now back above the bottoming 40-week moving average line. The weekly OBV line is recovering and the MACD oscillator has crossed to a cover shorts buy signal. The numbers look better, but I do not see an expansion of trading volume since the March low and I miss that from the equation.
In this Point and Figure chart of PANW, below, we used daily price data. Prices are in an uptrend and extended. There is a pocket of overhead chart resistance and the software is projecting $278 as a potential price target.
Bottom line strategy: PANW is pointed up but extended. The OBV line has risen nicely but I don't see an expansion in trading volume. I guess the bottom line is that I am not really comfortable with the long side of PANW at this juncture. Protect longs with a stop at $212.