FireEye Stock Breaks Out, Opening the Door to Higher Prices

fireeye stock
Credit:iStock.com/Alex_Schmidt

FEYE Stock: The Path of Least Resistance Is Towards Higher Stock Prices

Cyber security is becoming a bigger and bigger concern, and the recent hack into Equifax Inc. (NYSE:EFX) that compromised the information of 143 million American consumers is a testament to the need for greater security measures. Cyber security is a growing industry and investments like FireEye Inc (NASDAQ:FEYE) stock stand to benefit from the increased funds that will be allocated to this sector.

The fundamental backdrop supports higher FEYE stock prices, and my specialty, technical analysis, has just given me reason to believe that higher FireEye stock prices are now on the horizon.

If this is your first time frequenting my work, I need to point out that I generate my views on an investment by analyzing the company’s stock chart. This method of investment analysis is called technical analysis, and I have been using it for nearly two decades to create investment strategies.

This publication is a follow-up to a report that was published on July 27, 2017, titled “FireEye Stock Is Only Moments Away from a Bullish Breakout.” In that report, I outlined that a number of developments were suggesting that a move towards higher stock prices was under construction. In recent days, FEYE stock has closed above a very key level of price resistance, which is now suggesting that a move towards higher stock prices is now in development.

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The following FireEye stock chart illustrates the breakout that is indicating that a move towards higher stock prices is now in development.

FEYE price chart

Chart courtesy of StockCharts.com

This FEYE stock chart illustrates that on September 11, FireEye stock closed above a level of resistance that defined a consolidation wave. A consolidation wave is one of two waves that create constructive price action.

Constructive price action consists of a wave structure that alternates between impulse waves and consolidation waves.

The impulse waves, which are highlighted in green, define the stage in a bullish advance where the stock price appreciates in brief but powerful moves to the upside.

The consolidation waves, which are highlighted in purple, define the stage in a bullish advance where the necessary conditions are created so a new impulse wave can develop. This wave is characterized by a slow churn that effectively alleviates any overbought conditions that were created during the preceding impulse wave.

Also ReadThree Top Cybersecurity Stocks for 2017

These waves feed off each other, and in alternating wave structure, they create the necessary environment where a bull market can develop and flourish.

The breakout that completed the consolidation wave implies that a new impulse wave is now in development, and therefore higher stock prices are on the horizon.

This bullish wave structure is a new development that began earlier this year, and the following FireEye stock chart illustrates the indication that was instrumental in suggesting that a bull market was in development.

FireEye stock chart

Chart courtesy of StockCharts.com

This FEYE stock chart focuses on an indication that is created using the 50-day and 200-day moving averages. When these moving averages cross, a very influential signal is generated that serves to suggest that either a bull market is in development or a bear market is in development. The distinction between these signals depends on whether the 50-day moving average crosses above or below the 200-day moving average.

In September 2015, the 50-day moving average crossed below the 200-day moving average indicating that a bear market was in development. This crossing of the moving averages is called a “death cross.” This ominous sounding indicator serves to suggests lower stock prices are on the horizon. While this signal was engaged FEYE stock lost 67.97% of its market value when the share price fell from a price of $32.00 to a low of $10.35. This is a prime example that a signal with a name like “death cross” should never be ignored.

In May of this year, the 50-day moving average crossed above the 200-day moving average indicating that a bull market was in development. This crossing of the moving averages is called a “golden cross.” This profit-inspiring indication put the bearish implications suggested by the death cross to bed, replacing them with bullish implications.

This indication is not generated very often and, given its past performance, it is wise to pay heed. This indication is now creating a bullish backdrop that is supporting the bullish constructive price action, which is currently in development and suggesting that higher stock prices are on the horizon.

Analyst Take: 

On September 11, FireEye completed a wave that is now suggesting that higher stock prices are now in development. The bullish inclination towards higher stock prices is being supported by a golden cross that was generated in May of this year. This compilation of indications warrants a bullish view on FEYE stock, and as long as these indications are in bullish alignment, I will maintain this bullish stance.