Signal Says Tech Stock Could Surge to New Highs

Cloudflare stock has pulled back to a historically bullish trendline

Deputy Editor
Jun 8, 2020 at 3:24 PM
facebook twitter linkedin

The shares of Cloudflare Inc (NYSE:NET) are down 1.1% to trade at $29.10 at last check, taking an extended breather from their May 15 all-time high of $30.78. In fact, NET has taken a 3.7% haircut in the last five trading days. The good news is that this pullback has brought the I.T. stock within a historically bullish trendline.

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, NET has pulled back to within one standard deviation of its 40-day moving average. Within the past three years, two similar signals have occurred, after which the equity enjoyed an average 21-day gain of 11.57%, with both of these returns positive.

A similar move would put the stock at around $32.46, a new record high and past the stiff $30 level that has served as a ceiling in the last month. Longer term, NET is up 69% in 2020, and has more than doubled off its Oct. 21 lows of $14.50. 

NET june 8

Among analysts, four out of 13 in coverage are still hesitant on Cloudflare, while the 12-month consensus price target of $28.67 is a 0.9% discount to current levels. In other words, a round of overdue price-target hikes could help push NET even higher.

A short squeeze could fuel additional gains. Short interest has risen a whopping 74% in the last reporting period. These 6.35 million shares sold short now account for 8.69% of the stock's available float,, so an unwinding of these bearish bets could also help give the stock a push upwards in the near-term. 

With that being said, options could be a good way to go when weighing NET's next move. The stock's Schaeffer's Volatility Index (SVI) of 64% stands higher than just 16% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. 


Stop leaving money on the table with the same old broken options trading approach...

There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

Schaeffer's Daily Bulletin Offer


Special Offers from Schaeffer's Trading Partners