Cybersecurity firm Fortinet (FTNT) faced a significant stock decline despite beating earnings, due to concerns over growth slowdowns. Technical analysts see this pullback as a potential buying opportunity, with key support levels identified around $127.40, presenting a chance for a swing trade aiming for a 15-20% return.
Fortinet Stock Dip: A Pro Trader's Guide to Buying the Pullback
Summary: Despite beating earnings expectations, Fortinet (FTNT) saw a significant price drop due to concerns about slowing product growth and a reduced services outlook. Technical analysis suggests the stock is approaching key support levels, presenting a potential opportunity for a swing trade.
Fortinet (FTNT) recently delivered better-than-expected earnings and raised its guidance, yet the market reacted with a sharp sell-off. This punishment stemmed from indications of decelerating product growth and a more cautious services outlook. While the cybersecurity stock has experienced a technical breakdown, this significant decline has also brought FTNT closer to crucial support zones, a scenario that professional traders often look for when identifying potential swing trade opportunities.
Technical Analysis and Support Levels
According to analyst Jay Woods, the low of $127.40 reached on Thursday serves as a critical starting point for analysis. This post-earnings low is seen as a key support level to monitor. The area around $127.40 is particularly significant as it aligns with the rising 200-day moving average and the anchored Volume Weighted Average Price (VWAP) from its 2026 low. These confluence points are expected to attract buyer interest should the stock experience further weakness.
Trading Strategy: Buying the Dip
The recommended strategy is not to chase the stock if it rallies above $132, but rather to capitalize on the anticipated dip and retest of current lows. If traders enter around the $132 mark, the Thursday low of $127.40 should serve as the reference point for exiting the trade if support fails, necessitating appropriate stop-loss orders.
Should the stock move upward without retesting the anticipated lows, traders are advised to let the opportunity pass and seek other prospects. FTNT has a history of gapping lower after earnings and subsequently recovering. The current outlook anticipates a similar pattern over the coming months, with a target bounce back to the $155-$160 range.
Potential Risks and Long-Term View
A point of concern arises when examining the weekly chart, highlighting the importance of the daily levels holding firm. A break below Thursday's low could signal further downside, potentially towards the $110 area. Momentum indicators on longer timeframes suggest a possibility of additional downward risk. This underscores the critical need for stops to manage risk effectively if the swing trade does not unfold as planned.
Overall, this pullback is viewed as a prime opportunity for a swing trade with well-defined, minimal risk and the potential for a 15-20% return within the next few weeks. This analysis is provided by Jay Woods with Chase Games.
Disclaimer
All opinions expressed herein are solely those of the CNBC Pro contributors and do not reflect the opinions of CNBC, its parent company, or affiliates. This content is for informational purposes only and does not constitute financial, investment, tax, or legal advice, nor is it a recommendation to buy any security or financial asset. The information is general in nature and may not be suitable for individual circumstances. Consult with your own financial or investment advisor before making any decisions.
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