Finding any security in this cybersecurity stock? Here’s your trade on Palo Alto Networks (PANW) (February 08, 2016)
We’re looking at cybersecurity stocks, Palo Alto Networks ( NYSE:PANW ), and this is one of the big ones. I want you to harken back to Apple ( NASDAQ:AAPL ) and Neflix ( NASDAQ:NFLX ), right here, we’re talking about. Now we’ll go with Palo Alto Networks ( NYSE:PANW ) again, right here, we’re talking about. What I’m talking about is identifying tops. You’re not going to see them right when they occur, you’re not going to look at this and say, “Oh, that’s the top!” You don’t really know. You could say that you did, and that’s fine, in which case you would have been better off lying and say that you knew that this was the top. Ultimately, how ever you’re going to do this, and it’s just a function of risk management, always having an opinion but also knowing that there is a level, there is an event, there is some type of action that a stock can take that puts your opinion in doubt.
If you can do that, somewhere along the line you’re going to see that this is topping. And seriously, even if you are really dogmatic about it, forget about the exact level here, but lets look at this level just because this and this are two lows where this hit. You’re looking at this and you’re saying, “I am not going to declare that THIS is a top. I’m not going to declare that, until and unless the stock breaks down BELOW this floor here.” So even here at 155.00 you’re sitting here and you’re saying, “I’m not going to short this stock. I’m going to wait. I’m going to wait.” And then finally the stock does break through, even give it till 150.00, whatever. So you short. You’ve got a little “bugaboo” here for a while. But then ultimately the stock does what you think it’s going to do. You’re up over 20 percent on a short that you actually go in late on. That’s the deal.
So what are you going to do now? Here’s the thing: After such a big sell-off in the two days, 20 percent in just a couple days, lower volume today than on Friday, when everything was going straight to zero. This is kind of setting up for and oversold bounce. If NOTHING else, just an oversold bounce. The way I look at these stocks, I mean this thing looks like it wants to go to $70.00 or so. Not right away. I’m not saying that it will, though I’m not saying that it won’t either. Frankly, on the S&P, listen up, strap yourselves in, I could make a case for 1000.00 on the S&P, I’m not going to do it here, but I could make that case. So longer-term this thing is down. There’s so much pressure. All of these high-flyers, all of these expensive growth names are now just expensive. They’re desperately seeking value, this is not there yet.
So if you’re long this stock don’t sell it right now, wait for a bounce. If you’re short this stock, frankly I would suggest covering, because probably other people will, and then wait for the stock to RALLY. Now, this thing could just keep going below 110.00 and 100.00, and what I’m telling you now is decidedly wrong. But know this, as a stock moves LOWER it does become more attractive to somebody because it’s getting cheaper. So there’s ALWAYS an underlying bid to the market. The question is at what level? So here I’m thinking we’re going to get a little underlying bid here. We’re going to get a little bit of a reversal tomorrow. And if we do, frankly, that ‘s the time for you to be taking action and getting back it to this on the short side. Right now it’s just too much downward momentum. Stock do not just keep going down like this unless you’re Enron or WorldCom.
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