Cybersecurity Stock Chart Patterns

11/27/2019 6:00 am EST

Focus: TECHNOLOGY

Suri Duddella

Trader and Author, suriNotes.com

Tradeable chart patterns in cybersecurity stocks from Suri Duddella.

As the tech industry grows with massive digital transformation, cloud and edge computing have increased the demand for Cybersecurity companies. Cybersecurity is a science of keeping digital data through restricting access, firewalls, network and storage safety and user authentication methods. 

Some of the top cybersecurity companies are Palo Alto Net (PANW), Fortinet Inc. (FTNT), Okta Inc. (OKTA), CrowdStrike (CRWD), Cyberark Software Ltd. (CYBR). Here is a list of Cyber Security stocks and their performances in 2018 and 2019. 

cyber

cyber ytd

Several Cybersecurity stocks are exhibiting Cup & Handle patterns in its sector. 

Cup & Handle Patterns

The Cup and Handle Chart pattern was developed and popularized by William J. O’Neil in the 1980s through his CANSLIM methodology, Investor’s Business Daily newspaper and his book "How to Make Money in Stocks."

Cup and Handle pattern resembles a Cup with a Handle.  Cup and Handle patterns are continuation patterns, and they usually form in bullish trends. Most Cup and Handle patterns are very reliable and offer great trading opportunities. They also form in all markets and in all timeframes. The “Cup” formation is developed as consolidation phase during price rallies from the round bottom formation over multiple weeks to months.  The “Handle” part forms due to a price correction after “Cup” formation and before a clear breakout to the upside. 

Cup and Handle pattern structure show the momentum pause after reaching a new high in a U-Shape form, followed by another attempt to breakout. When this breakout from the rim of the cup fails it starts to fall back to build the "Handle" structure. Usually, the handle structures are small, and the handle depth should not exceed more than 50% of cup depth. This handle part of the pattern generates interest in buyers as they expect the pattern to breakout from these levels. The pattern is valid only if price convincingly breaks out with increased volume above the rim of the cup level.

cup and handle

HACK (Cyber Security ETF)'s Cup & Handle pattern

The ETFMG Prime Cyber Security ETF (HACK) formed a Cup & Handle pattern from July 2019 until now between $36 to $42.25. The current price is near the Cup breakout level ($42.25). Cup & Handle patterns need to form a handle before they fully breakout to see the next targets. On its breakout, the next targets are set at $45.96 to $46.97, $48.26. Once the handle is formed, C&H stop is placed below the handle low.

hack

PANW Cup & Handle Pattern

Similar to HACK, PANW daily chart is also forming a Cup & Handle pattern (Cup part for now) since April 2019 until now. After a successful handle formation, PANW breakout level is above $260.63.  The first target is set at $286.65 and then at $302-$315. C&H stop loss is set below the handle low.

panw

CIBR Cup & Handle Pattern

The First Trust Nasdaq Cybersecurity ETF (CIBR) is also trading in Cup & Handle pattern near its breakout level ($30.78). A handle formation is required for a successful C&H breakout trade. After its breakout, CIBR targets are set $33 and $34.62.

cibr

Find more of Suri’s work at surinotes.com.

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