Bulls Bank Massive Profit on Cybersecurity Stock

PANW bounced off several layers of support

Deputy Editor
Feb 28, 2024 at 1:53 PM
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Subscribers to Schaeffer's Weekly Options Countdown Plus scored a 302% gain in only two days with our Palo Alto Networks Inc (NASDAQ:PANW) weekly 3/1 282.50-strike call recommendation. Below, we'll unpack the reasoning for the short-term bullish position on PANW.

When we recommended this trade on Friday, Feb. 23, the cybersecurity stock had just suffered a post-earnings pullback. The drop sent the stock down to the 200-day moving average, but support came into play above this long-term trendline, with additional help above double its 2023 lows. 

Even more support arrived above the 128-day trendline, meaning traders should have anticipated continued moves to the upside, as the shares attempted to fill the gap lower. We also recommended traders target shorter-term moves back to the 100- and 80-day moving averages at $290 and $300, respectively.
 
What's more, Palo Alto Networks stock’s pullback was propped up by the lower end of a bullish channel connecting higher lows from January to August. We predicted continued support above these levels would send the shares back to their 2023 high at $318. After breaking below the 10-month moving average after earnings, the security found a floor above this level, which correlated with support above $90 billion-dollar market cap.
 
A move back up to the 20-week trendline could have meant a minimum move back to, and with additional support, above $295. If the shares continued to attract buyers post-earnings, a move back to the 80-day moving average (which sat at $300), would have correlated with a significant level of calls at the psychologically significant number and century mark.
 

Just two trading days after our recommendation, PANW bounced the aforementioned levels of support. In fact, shares rose 7.3% on Feb. 26 for their best day since August and 4% on Feb. 27, and swung to the positive side of their year-to-date breakeven.

PANW Chart 2 February 282024

 

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