PANW Stock: Bull Run
I am bullish on Palo Alto Networks Inc (NYSE:PANW) stock, and the reason for my bullish outlook is actually quite simple. It is based on the same method I use to analyse every investment that I have the pleasure of covering. The price chart of PANW stock is constructive, and I can strategically and systematically apply a trading strategy to this position.
My method is not rocket science; the only factors that are needed are that I obey the rules that I set out prior to establishing a position. This is effective in managing my risk, which is the most important aspect to any trading strategy. If I can keep my losses small and defined, I can live to trade another day. This is the premise of my trading strategies.
Chart courtesy of StockCharts.com
The Palo Alto stock chart above is simple and shows the effectiveness of the 200-day moving average. The 200-day moving average is the dividing line between stocks trading in a bull market versus stocks trading in a bear market. When the share price is above the moving average, it is bullish; when the share price is below the moving average, it is bearish.
This indicator serves to smooth out the long-term trend in PANW stock. In December 2013, Palo Alto stock crossed above the 200-day moving average and the share price proceeded to climb 300% before peaking at $200.55. This marked the bull phase.
In January 2016, PANW stock crossed below the 200-day moving average and shares proceeded to trade in a range between $115.00 and $160.00. This marked the bear phase.
In September 2016, Palo Alto stock once again crossed above the 200-day moving average, and that is one of the reasons I am currently bullish on PANW stock, as it is once again on a bull phase.
The short-term Palo Alto stock chart illustrated below supports the bullish premise and helps to further define my risk.
Chart courtesy of StockCharts.com
The run higher of the lows in June have been very uniform. PANW stock has been confined by two trend lines that represent support (highlighted in baby blue) and resistance (highlighted in black). Swing traders can use these trend lines to effectively trade the range. The price has tested support and resistance on numerous occasions, but the price tends to hug the resistance line as the buying pressure is high.
In October 2016, Palo Alto stock generated a golden cross. 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 signal serves to confirm that a bull market is on the horizon and reaffirms the price increase. It is not uncommon for a trend to accelerate after such a signal, as traders use this as a prevailing tailwind that will further drive share prices.
As a personal rule, I never trade against this signal. Bullish crosses warrant holding a bullish position (or a neutral position, at minimum).
It is worth noting that the 200-day moving average and the trend line labeled “Support” on the above chart are both now sitting at the exact same level. If this level is tested in the coming days, I do not believe it will be broken on the first attempt, because two levels of support will be eyed by traders. If the support trend line breaks, I will have serious concerns that my bullish bias on Palo Alto stock has come into question.
The Bottom Line on Palo Alto Stock
I am bullish on Palo Alto stock, and I believe that the trend toward higher prices has only begun. My investment bias is purely based on the signals I generated on the price charts. My bias will continue to remain bullish on PANW stock until the price chart gives me reason to change that view.