CUDA Stock: Bullish Price Action
Barracuda Networks Inc (NYSE:CUDA) stock is set to trade higher on Tuesday, after the the company posted earnings per share (EPS) of $0.22 on $88.8 million in revenue.
This beat analysts’ expectations on both the top and bottom lines and, as a result, investors bid up the price of CUDA stock by 8.12% in after-hours trading. The after-hours gain comes on the heels of a session that already saw investors bid up Barracuda stock by 4.35%.
Investors were bullish going into the earnings report, and the numbers clearly didn’t disappoint. This in itself is an extremely bullish price action, so this makes it difficult to believe that CUDA stock was trading as low as $10.00 in January of last year. I believe that this turnaround story has its eyes set at challenging and surpassing the $30.00 mark.
My beliefs are based on technical analysis. This style of investment analysis uses past volume and price data to discern trends and forecast future prices. Technical analysis has been the basis for my investment strategies and market views for over a decade now.
The following Barracuda stock chart illustrates the trend that has developed off the lows that were created in January of last year.
Chart courtesy of StockCharts.com
The CUDA stock chart above illustrates the trend that began shortly after the stock price bottomed in January of last year. The trend is clearly bullish, as it moved from the lower left to the upper right.
There are two parallel trend lines that define this trend; the upper trend line represents resistance and the lower trend line represents support. This pattern is known as an ascending channel and, as long as CUDA stock continues to oscillate within this channel, the trend toward higher prices is expected to continue.
This bullish trend toward higher prices was confirmed in July 2015, when a golden cross was generated. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. This indicator confirms that bullish momentum has now overwhelmed any bearish momentum, which means that the bulls are now in control. Traders use this indicator to confirm that a bull market has already begun.
Each and every time Barracuda stock has hit support, outlined by the ascending channel price, it has reversed the trend and the resistance level outlined by the ascending channel was the next price objective.
The following Barracuda stock chart illustrates the price action that supports the notion of higher prices.
Chart courtesy of StockCharts.com
The CUDA stock chart above illustrates the healthy bullish price action that is contained within the ascending channel. This price action consists of impulse waves that advance the stock price higher and consolidation waves that alleviate any overbought conditions that were created and set up the next impulse wave.
The current consolidation wave was completed prior to the earnings release, as investors were already anticipating a good earnings report. The completion of the consolidation wave is illustrated on the chart above as a breakout. This breakout suggests that a new impulse wave is now set to develop, and a price advance that will take Barracuda stock above the previous peak at $26.69 can now be expected.
As long as this healthy price action continues, it suggests that higher prices are likely and that the resistance outline by the ascending channel is the next logical price objective.
Bottom Line on Barracuda Stock
Barracuda has been in an uptrend since it bottomed in January of last year. The positive earnings report only supports the notion that higher CUDA stock prices are likely, and that the price action within the channel confirms it.