Thinking about buying Fortinet (FTNT)? Let’s walk through the chart. (May 23, 2019)
FTNT
Just a real quick look at Fortinet ( NASDAQ: FTNT); there is not a whole lot to look at in the market unless you want to cry. A lot of things are moving lower, a lot lower. Let’s talk about risk management here. Fortinet ( NASDAQ: FTNT) is a stock I had several weeks ago, actually a full position in this stock, I really liked the way it’s trading. Now I don’t own any and haven’t owned any for a while, but let’s talk about that for a second.
You see the stock back here, it’s kind of a cup and handle type of thing. A nice uptrend, a pullback and then sideways consolidation for several weeks; looking for a breakout above this line here. Boom, we get that we’re; into the stock, now we are looking to see if it pushes to a new high. Boom, we get that it’s all good. Adding to the position here; cautious about the overall market but the stock is looking good. That’s okay; this reversal here, maybe this is a top. But you know what? We are not trading this stock we’re in a position on this stock. We think Fortinet ( NASDAQ: FTNT) stock is going to go much higher, it is just kind of gyrating around a bit. We are thinking, though, about managing our risk, so now the stock is back here.
What I am looking at is what it is going to do at $90.00 because this is the breakout level. Is it going to hold at $90.00? It looks like it did, yabadabadoo , my patience has been rewarded. I am going to stick with the trade; I am not going to add more because the stock traded down for 2-days and then it gapped down on the morning of the 3rd. Basically, it traded down, 3-days in a row, really steep. And now, how much buying effort and energy is it going to take to push the stock higher? So I am not buying more here but I am not selling. I’m okay. I’m okay. By this time I am thinking, are we going to get back up here? Is this a Phase 1 from a squeeze, Phase 2 from a pullback, and then Phase 3 follow-through? Or is this going to be just some kind of a little rebound that makes this turn out to be the ultimate top?
So I am watching it. It is still okay. Now I am getting a little concerned. At this point I am thinking, You know what? The market is kind of weird, I don’t like the way things are happening. The market peaked, the S&P ( INDEXSP: .INX ) peaked here on May 1st. This is lower so this is weak relative to the broader market. I don’t like that, it is kind of leading the way, and then, of course, earnings. I was out a day or two before this but I held some over earnings. I held a small position over earnings because I had a cushion. But then I am sure as heck aren’t going to buy any back when the stock gapped down like this but I am holding it, not anymore, and that’s it.
That is kind of me walking you through my general trade on this. On the whole trade, in the aggregate, I might have made a little bit of money but certainly not worth bragging about. But I know I didn’t really lose any money. If I was looking at each individual trade, I made great money, I made okay money, I didn’t make too much money; I scaled in and I scaled out, so it depends how you want to look at it. I am just kind of walking you through my logic on this. I couldn’t give a rip about Fortinet ( NASDAQ: FTNT), that as a company it’s software, I know what they do. But what I am saying is, I don’t have an ego investment in Fortinet ( NASDAQ: FTNT) or in being right on this stock. I just want to make money on this stock. And if I am not making money on the stock I don’t care about being right or wrong I just don’t want to lose money.
In this case when the stock started rolling over I am thinking more about protecting my money. I am not thinking about whether I am going to make money or lose money on the trade anymore. I am thinking about protecting my money. I can have dollar bills or I can have FTNT ( NASDAQ: FTNT). At some point I decided that having dollar bills is preferable to FTNT ( NASDAQ: FTNT). Because if I have FTNT ( NASDAQ: FTNT) there is only one trade that I can ever make and that is from FTNT ( NASDAQ: FTNT) back to the US dollar. If I have the US dollar I can make any trade I want, any stock I want. So being in dollars is much better than being in a stock where you are kind of unsure about it.
The bottom line on this is, as this is now below the200-day moving average, to me this is just trading; buy some in here, buy a little more, sell some at a profit, hang on to some. And then after earnings hang on to it, see if it rebounds. And then finally get out the rest of it; that’s the trade. Now I look at this stock and it has broken below the 200-day moving average, I am not looking at this as, Oh, now I can get in at a lower price than when I bought it the first time. Boy, I could really get a good trade going on this. No, don’t care about that.
Don’t care about what the ticker is. Care about what the entry is. And right now I can tell you it will be months and months before I will trade this stock again, simply because it needs to regain, it needs to recover. It is going to need a long time, probably more than this chart has. It is going to need a long time to recover and get back above the 200-day moving average and the 50-day moving average. It is going to need to spend a lot of time up here before it builds any kind of a base that is strong enough to give this a chance for more upside.
Free Chart