A Real Money subscriber recently sent me an email about the price action of Cloudflare, Inc. (NET) , the web infrastructure and website security company. We last reviewed NET on Dec. 21 where we wrote that, "NET went higher after our recommendation to sell so we left money on the table. With some potentially bearish candlestick patterns over the past two weeks and the broader market showing weakness this Monday morning, a cautious stance for the next several weeks still seems like a good idea."
The shares have corrected lower from the middle of February so a fresh look at the NET charts does seem like a good idea.
In the updated daily bar chart of NET, below, we can see that the shares have declined and are now trading below the declining 50-day moving average line. NET is still above the rising 200-day moving average line which intersects around $55.
The On-Balance-Volume (OBV) line has rolled over and weakened since late December telling us that sellers of NET have been more aggressive. The 12-day price momentum study shows equal lows at the end of February and now. This is a bullish divergence when compared to prices making lower lows but the time frame is very short. The equal lows on the momentum study suggests that buyers used the weakness this month to buy the dip.