Stocks quoted in this article:
Networking concern F5 Networks, Inc. (NASDAQ:FFIV) reported in-line, third-quarter earnings on July 18, but the company also guided below consensus for its first quarter (beginning in December). The next day, shares of FFIV closed higher, up nearly 4%, at $102.75. Since then, the stock has basically chopped around the $105-$90 region. Last night, shares closed near the upper part of this range at $102.31. Overall, FFIV is down more than 6% year-to-date, as the iShares S&P North American Technology-Multimedia Networking Index Fund (ETF) (NYSEARCA:IGN) is also underperforming, down nearly 3% year-to-date. Today, I would like the analyze the technical and sentiment picture of FFIV with the following bullet points:
- Shares are trying to start a new uptrend after recently breaking its downtrend line, which began in early May. Looking at the chart below, we are in the early stages of higher highs and higher lows. (Click on chart to enlarge.)
- $106 is the price level representing a 0% year-to-date return. This could, therefore, act as a resistance point.
- The $105 price level has been acting as resistance over the summer.
- Coinciding with the $105 mark is the significant 320-day moving average, which has been a source of support and resistance over the past few years.
- The descending 80-day moving average is also providing resistance.
- Short interest rose nearly 100% since bottoming three months ago. Nearly 5% of FFIV's float is sold short. So, potential for a short squeeze is a possibility.
- The analyst community's sentiment towards FFIV is not very extreme. Eighteen out of 29 analysts rate the shares a "buy" or better. There is a potential for future downgrades, which could create a headwind for shares.
- The 50-day buy-to-open call/put ratio stands at 1.51, meaning 151 calls are being purchased for every 100 puts during the past 50 days. This ranks in the 95th percentile of all readings taken during the past year. At first glance, this may seem to be an extreme in call speculation. But with the huge increase in short interest over the past three months, this could quite simply be hedging activity by the aforementioned short sellers.