There's good news and bad news to the post-earnings reaction. The good news is rather obvious, in that Palo Alto Networks stock is trading higher and not lower. The bad news is that the stock is fading off its session highs.
It leaves bulls in a dilemma, as they need to decide whether this earnings fade is an opportunity to get long or add to their position, or if it's a warning sign that more losses may be on the way.
It's sorta like Coupa (COUP - Get Report) , which reported earnings earlier this week. Shares shot higher on the results before fading throughout the session. Now teetering on a breakout level, investors are wondering why it's not trading better, given its solid report and guidance.
In the case of Palo Alto Networks, the company beat on earnings and revenue expectations, while management provided a strong three-year outlook for sales growth. Even though management's long-term outlook was solid, their short-term forecast could have been better.
Palo Alto Networks is a holding in Jim Cramer's Action Alerts PLUS member club, who had this to say on the quarter: "If there was ever a roller coaster reaction to an earnings result and commentary, this was it, folks." With the after-hours action, this comment is putting it lightly.
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Trading Palo Alto Networks Stock
When they say Palo Alto Networks stock has been a wild ride, it's no joke. Shares initially plunged to $180 in after-hours trading before ricocheting up to $220. Now near $210, the reaction is certainly mixed, to say the least.
On the plus side PANW stock is holding up above the 20-day moving average and downtrend resistance (blue line). On the downside, the 50-day and 200-day moving averages could not support the stock, nor could the 50% retracement near $210.
The setup now is rather straightforward.
If the 20-day and downtrend resistance hold as support, look for Palo Alto Networks stock to reclaim the 50-day and 200-day moving averages. If it does, Thursday's high at $218 is on the table, along with the after-hours high near $220 and the 38.2% retracement around $222.If the 20-day and downtrend resistance fail as support, the $195 level is certainly possible for Palo Alto Networks stock. This level has been buoying PANW for months now. Should it fail, the after-hours low near $180 is next up.