Palo Alto Networks (PANW) - Get Palo Alto Networks, Inc. Report was once the "best in breed" when it came to the cybersecurity stocks, but it has lost ground to Proofpoint (PFPT) - Get Proofpoint, Inc. Report and Fortinet (FTNT) - Get Fortinet, Inc. (FTNT) Report . Over the last year, Palo Alto is up only 5%, while Proofpoint and Fortinet are higher by 23% and 12%, respectively, a strong indication that customers are shifting to security-as-a-service cybersecurity threat protection.
All three are lower, but before you buy the dip, let's look at the chart.
The daily chart shows the shares of Fortinet making a series of higher lows and higher highs since 2016 and in the process forming a rising triangle pattern. They tested the $41 area in May and pulled back to the triangle uptrend line, but have since returned to retest resistance. A move above this level would be considered a long-term breakout and would close a 2015 downside gap.
Shares of Proofpoint rallied sharply off their April low this year and ran up to test the $91 area. They came off in June but this month they have made a second assault on that resistance level. The price momentum and money flow indications are similar on both charts. Moving average convergence/divergence is tracking higher and above its centerline, and Chaikin money flow is in positive territory.
The cybersecurity threat is not going away and these two stocks have been in strong uptrend, but the earnings reports will have to be equally as strong to maintain the upward momentum in price. A long entry point in either stock will require two consecutive upper candle closes above their respective resistance levels to confirm breakouts and the resumption of their primary trends.
The author is an independent contributor and at the time of publican had no position in the stocks mentioned.