CrowdStrike Reports After Wednesday Close - Here's the Trade

CrowdStrike stock is hitting records ahead of its earnings report. Can the momentum last? The charts give us a hint.
Publish date:

The momentum has been strong in a few groups, and CrowdStrike  (CRWD) - Get Report is one beneficiary.

At this writing the shares are up 11% and at records before the Sunnyvale, Calif., provider of cybersecurity solutions reports earnings for the second quarter ended July 31. That report is set for Wednesday after the market close.

With shares of Zoom Video  (ZM) - Get Report rocketing more than 40% at one point on the day after it posted better-than-expected earnings, work-from-home plays are in the spotlight.

Nor does it hurt that DocuSign  (DOCU) - Get Report is ripping to new highs on strong results. Or that cloud, cybersecurity and other tech plays have been robust as of late.

Can CrowdStrike deliver when it reports and give investors even more upside?

Trading CrowdStrike Stock

Daily chart of CrowdStrike stock.

Daily chart of CrowdStrike stock.

After a strong run from the March lows to the July high — a near quadrupling — CrowdStrike shares settled into a sideways consolidation pattern.

CrowdStrike continued to find support near $95, while a shallow downtrend resistance mark (blue line) kept a lid on the stock price. The shares last week burst through this mark, before pushing even higher this week.

On the downside, I would love to see a pullback that finds support in the $110 to $115 area. In that zone, the shares will find support from the 20-day and 50-day moving averages, as well as the backside of prior downtrend resistance.

Should the stock continue to run, finding an upside target becomes a bit more difficult. 

It should be mentioned that for many traders, upside targets are areas to take some profit (likely not all) and/or raise their stop-loss orders. Ultimately, investors must stick to their plans, but mapping out levels can help with decision making. 

In the case of CrowdStrike stock, the shares are rallying into the three-times range extension, when measuring from the March low to the 2020 highs. Under that measure, the 361.8% extension comes into play near $160.

If, however, one measures from the March low to the 2019 highs near $100, the 161.8% extension comes into play at $145.10.

Investors can look at that however they would like to. Ultimately, though, we’ll need to see the post-earnings action to get a more clear idea of which levels become relevant and which do not. 

For now I am looking to see how CrowdStrike stock handles $145 to $160 on the upside (and potentially even higher) and $110 to $115 on the downside.