Skip to main content

Shares of Palo Alto Networks (PANW) - Get Palo Alto Networks Inc. Report -- a stock so many growth investors love -- took a beating on Thursday. Shares closed lower by 5.14%, to $204.30, in midday action after the company reported its quarterly results.

Even though Palo Alto Networks smashed third-quarter earnings and revenue expectations, the outlook was too disappointing. Billings missed the mark, too. Disappointing forward expectations doesn't typically bode well for growth stocks in the first place, but it's even more true given the current environment we're in.

Also, the company's acquisitions are concerning some investors. Is it masking an organic growth issue? That might be a stretch at this point, but it has investors talking. Its price action has investors talking, too. Shares hit a post-earnings high near $260 in late February and were lower by ~17% coming into the current report.

While there were some concerns in the quarter -- hence the selloff -- the overall takeaway is that Palo Alto Networks remains solidly positioned for the long term. That leaves investors trying to figure out what it's worth. That, of course, leads us to the charts.

Palo Alto Networks is a holding in Jim Cramer's Action Alerts PLUS member club. The club did some profit-taking north of $250, but has a new buy area on watch. Want to be alerted before Jim Cramer buys or sells PANW? Learn more now.

Scroll to Continue

TheStreet Recommends

Trading Palo Alto Networks

Daily chart of Palo Alto Networks stock.

With Thursday's fall, shares are knifing right through the 200-day moving average as investors try to decipher what the right price is for Palo Alto Networks stock. Holding the 200-day would have been encouraging, as a drop below puts it into a make-or-break zone.

Investors would clearly prefer for PANW to stay north of $200, but the must-watch level is actually at $198.50. This is the 61.8% retracement for the one-year range. With shares now in overbought territory (blue circle) and down 21% from its highs, many are looking for shares to find some support.

If $198.50 to $200 holds, a bounce back to the 200-day near $214 is possible. A further rally up to the declining 20-day moving average is possible, too, although it's likely this moving average will act as resistance.

Should support fail, look to see where buyers step in. That could be in the low- to mid-$190s, or it could be down in the $175 to $180 range. A stop-loss is prudent for traders in Palo Alto Networks stock and investors shouldn't be surprised if more losses occur in the short term. After all, PANW is affected by the trade war, and if tensions escalate as many expect, this stock could find itself under more pressure. It would be encouraging to see Palo Alto stock put in a few days above $198.50 to $200. Otherwise, lower prices are possible.

This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.