Shares of CrowdStrike (CRWD) are down about 12.5% in afternoon trading on Friday.
Is this post-earnings decline an opportunity get long this red-hot IPO winner or a warning sign for bulls to hit the exits while they still can? It's opposite the reaction we're seeing in DocuSign (DOCU - Get Report) , which is up almost 20% on the day.
On the charts, shares are teetering on a key retracement level, but are also below a key support level for CrowdStrike stock as well. In other words, the post-earnings action is mixed, but there's a way for traders to approach the stock in a reactionary manner. That is, waiting for a specific move to occur, triggering a reaction.
Trading is a series of "if, then" scenarios and as is usually the case, the simpler the better.
For CrowdStrike, the company reported a second-quarter loss of 18 cents per share, beating estimates by 5 cents per share. Revenue exploded 94.1% year-over-year to $108.1 million, topping analysts' estimates by $4.3 million.
Better than a top- and bottom-line beat though is robust guidance, which management also gave investors. Management's outlook for earnings and revenue in the third quarter and for the full year came in ahead of consensus expectations, causing some bulls to wonder if this post-earnings reaction is more opportunity than warning.
Let's explore the charts.
Trading CrowdStrike Stock
At $75.95 is the 38.2% retracement. If this level supports CrowdStrike stock, investors need to see a quick move back over $83. Not only has this level been support since July, it's also where the 8-day and 50-day moving averages are.
Over $83 and uptrend support (blue line) is nearby, while the 20-day moving average is up near $86.75. Above this area and $100 is certainly not out of the question.
Now, despite how great these headline numbers look, let's not forget that CRWD stock went public at $34 per share. With a 52-week high of almost $102, the stock has been good for nearly a triple so far in its short lifespan as a public entity.
Given that, a pullback isn't completely uncalled for -- even with solid quarterly results. If shares lose the $75 level, look for a decline down to the $68 to $70 area. That will bring short-term downtrend support (purple line) into play, and more importantly, the 50% retracement.
If that fails to buoy CRWD stock, the 61.8% retracement near $60 will be on the table.
For bulls, it would be best to see a reversal in the next few days and a reclaim of the $83 level. Otherwise, CrowdStrike stock may continue to lose momentum.