Here's the Key Level Palo Alto Networks Must Clear After Earnings Rally

Palo Alto Networks is rallying on better-than-expected earnings but it still faces a key resistance mark. Here's the level it must clear.
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Palo Alto Networks  (PANW) - Get Report was running on Friday, up about 5.5% after better-than-expected earnings.

It’s been a tough trading environment for tech stocks lately. High-growth stocks have been decimated by a painful bear market. FAANG stocks have held up much better, but for the most part have lacked upside momentum.

The in-between stocks - companies like Palo Alto Networks - have more growth than the mega-cap companies, but more stability than the high-growth stocks. But they’ve stagnated too.

Earnings should help, with Palo Alto’s top- and bottom-line beat and strong outlook giving bulls some confidence. A slew of upgrades and price-target hikes helps too.

Even with Friday’s jump, Palo Alto Networks has risen just 1% so far on the year.

On the plus side, it’s rallying on earnings. That’s not something too many tech stocks have been able to pull off. Roku  (ROKU) - Get Report jumped on its quarterly results and Facebook  (FB) - Get Report had a nice move to all-time highs after its results. 

But these stocks have been the exception, not the rule. Let’s look at the charts.

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Trading Palo Alto Networks

Monthly chart of Palo Alto Networks stock.

Monthly chart of Palo Alto Networks stock.

In the fourth quarter, Palo Alto Networks stock broke out over $260, kickstarting a massive move up toward the $370 to $375 area.

However, this zone has now become resistance. While the stock sports a 52-week high of $403, that rally was short-lived as growth stocks were hammered from mid-February - around when Palo Alto also topped out - until the recent lows earlier this month.

With that being said, Palo Alto's price action seems more like consolidation than anything else. In that sense, this pause should be seen as healthy price action, as the stock builds out a bull flag formation.

That consolidation is clear on the monthly chart. 

So far, the 61.8% retracement is acting as a bit of resistance, near $368. If shares can clear this measure, it quickly puts the April high in play at $373. Remember, this area has been resistance for several months now.

If it can give us monthly-up rotation over $373, it puts $400 in play. Keep in mind, this rotation may also take place in June, giving bulls a multi-month rotation.

On the downside, the $320 area continues to act as support and it now has the 10-month moving average nearby. It would be very discouraging to see shares lose the April and May lows, as well as the 10-month moving average, putting $300 or lower in play.

On a real breakdown, a retest of the $260 breakout level could be possible, but that’s a long ways off. Let’s focus on how Palo Alto Networks responds to current resistance.