Skip to main content

Fastly Charting Improves

Tim Collins sees life in beaten-down shares ahead of earnings.
  • Author:
  • Publish date:

Despite its grand name, cloud computing is a pretty simple idea. You stack a bunch of servers together, give them a really great connection to the internet, and then store people’s data for a fee. You make money, they access their files on the go.

For companies like Fastly (FSLY) it can be a win-win, if people are paying attention.

“Fastly feels forgotten,” Tim Collins wrote recently on Real Money. "Fastly finally looks like it has bottomed in terms of earnings disappointment and guidance after last quarter, which is needed with earnings set to be reported on Nov. 3. It's been string of rough quarters.”

In an industry that rewards size and consolidation, Fastly has struggled over the past several months. From a February high close around $118 per share, by early October it had sunk to around a $37 price point. The question that Collins has begun asking is, does this indicate a company that is losing ground? Or does it indicate an undervalued asset that the market is overlooking in favor of flashier picks?

How the Long Tech Rally Evolved

TheStreet Recommends

There’s some evidence of the latter.

A recent “push higher in price triggered a breakout on the daily chart,” he noted, adding that the stock had then consolidated “in an orderly fashion lower” creating a bullish flag.

That in turn was followed by a break out “of the flag for a second (confirmation) day and above the previous highs. We have to look back three months to find the last time the stock traded in the low $50s.”

MACD, or moving average convergence divergence, is mirroring the price action, while the parabolic stop-and-reverse (PSAR) is confirming the breakout. Anything under $48 is a stop, so buyer's here need to be willing to size with that in mind. Upside targets are $57-$58.”

Collins isn’t ready to bet that Fastly is all the way back, but right now he likes what he sees.

Get more trading strategies and investing insights from the contributors on Real Money.