Palo Alto Networks (PANW) - Get Palo Alto Networks, Inc. Report will report fiscal first-quarter earnings after the close of trading Monday, while the stock is consolidating its recent gains ahead of the release.
A few months ago, the stock was flirting with a breakdown below $190 as investors continued to sell after disappointing earnings.
They apparently have changed their tone in recent months. Despite the massive selloff that many high-growth stocks like Roku (ROKU) - Get Roku, Inc. Class A Report , Shopify (SHOP) - Get Shopify, Inc. Class A Report , Twilio (TWLO) - Get Twilio, Inc. Class A Report and others have experienced, Palo Alto shares were holding up relatively well.
In mid-October, shares embarked on a breakout over the $215 mark, rallying $35 a share in just a few weeks. Over the past week, Palo Alto stock has been chopping between $245 and $250, the latter of which has been a big-time level of resistance in 2019.
In February, the stock gapped from $235 to $260. Within a day though, shares lost steam and failed to hold $250. It has been resistance since then.
So can shares break out over this major mark on earnings? Let's look at the charts.
Trading Palo Alto Networks Stock
As you can see on the daily chart above, PANW stock failed to hold the $250 mark in February, then found this area to be resistance multiple times over the ensuing months.
Now back to this area for the first time since May, the stock is chopping just beneath $250 as it awaits the company's quarterly results. Put simply, good results will likely propel shares over this mark, putting the $260.63 high on the table.
On a rally, bulls will want to see if Palo Alto stock can take out this high mark. But perhaps more importantly, they need to see shares close above $250. As long as they can do that, the $250 level becomes the "line in the sand" on the downside.
Upside targets include the obvious -- the former high at $260.63 -- as well as a Fibonacci extension up in the low-$280s.
We also need to look at potential downside too.
The first level of interest is the rising 20-day moving average, currently near $239. Below that and $230 would be an important level to hold in my view. This mark has played a key role on Palo Alto's chart throughout 2019. Should both levels fail as support, the $222.50 area is a must-hold mark, where the stock has its 50-day and 200-day moving averages.
I love how Palo Alto is consolidating its gains. But I need to see shares break out over $250 and hold this mark as support in order to trust it on the long side.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.