Scouting Out Opportunities in NetScout

08/14/2015 7:00 am EST


Gregory Harmon, CMT

Founder and President, Dragonfly Capital Management

Greg Harmon, of Dragonfly Capital, takes a technical look at the stock of this leader in application and network performance management products and solutions. From a longer-term perspective, a big symmetrical triangle has formed, so Greg shares his outlook moving forward.

Explorers scan the horizon dreaming of the possibilities. Stock traders do the same thing. Well, sort of. Stock traders look for opportunities in their universe using the tools they are comfortable with. Some use fundamental data, others follow price data. I am one of the latter, more interested in the supply and demand for the company’s stock than the supply and demand for the company’s products.

So I look at price patterns and prior support and resistance levels to decide where to place money. Mostly I use my eyeballs and experience to find them. But recently I have started to use some computing tools to help. The scan I have put together has come up with some great ideas lately. I still don’t blindly trust it and need to look at the price action myself to determine if it is a viable vessel to ride higher.

Click to Enlarge

One that popped up on the screen Thursday was NetScout Systems (NTCT). The chart above shows the price action over the last 18 months. In that longer view there is a big symmetrical triangle that has built. When it unloads the built-up power with a breakout, it would look for a move of $20. But that is for the near future, possibly.

Thursday it is pushing over the mid-line of that triangle, and more importantly, over three month resistance at 40.50. As it does so the Bollinger Bands® are opening higher and the momentum indicators are bullish, with the RSI moving up and the MACD bouncing higher. Looks like it could run at least to the top of the triangle at 43.50, but real resistance does not show up until the April top at 45.

Short interest is high in this name too at near 11%. It has big open interest at 40 for next week, but if it gets going the open interest at 55 is even bigger. You might use the breakout level as a stop loss and see just how far this journey can take you. Supposedly, eight analysts follow this stock but only two have mentioned it in the last ten months and they rated it a buy. From a social perspective only 51 traders follow it on Stocktwits compared to a stock like Walt Disney (DIS) with 2,583 followers and Apple (AAPL) with 34,857.

By Greg Harmon of Dragonfly Capital

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