A key resistance level has formed in the chart of Fortinet (FTNT). If this level is surpassed, a breakout could occur.
FTNT is a cybersecurity vendor that sells products, support, and services to small and midsize businesses, enterprises, and government entities. Its products include unified threat management appliances, firewalls, network security, and its security platform, Security Fabric.
The coronavirus pandemic resulted in many people working from home. This required cloud computing services to enable much of that work, and FTNT’s firewall protected data centers that powered the cloud. This led to a 14% year-over-year rise in third quarter product revenue. The company’s service revenue was also up 22% year over year.
FTNT had $1.7 billion in cash as of the end of the last quarter, and has a current ratio of 1.5, indicating it has plenty of liquidity on hand to cover short-term debt. The company is also highly profitable with a net profit margin of 18.4%.
As mentioned earlier, revenue growth has been strong over the past year. Earnings are also up quite a bit over the past five years, with an average rise of 117.9%. With that much growth, the stock is trading at a high multiple, as expected. It has a trailing P/E of 54.01.
The stock has shown bullish long-term momentum, but mixed short-term performance. This has led to a Momentum Grade of C in our POWR Ratings system.
Take a look at the 1-year chart of FTNT below with my added notations:
Chart of FTNT provided by TradingView
During the past several weeks, FTNT has formed a key level of resistance around $155 (red). The stock has tested that area multiple times recently, and it is currently sitting right under that level again. A solid close above $155 should lead to higher prices for FTNT.
A long trade could be entered on a breakthrough of the $155 resistance level.
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FTNT shares were trading at $152.74 per share on Thursday morning, up $1.82 (+1.21%). Year-to-date, FTNT has gained 2.83%, versus a 2.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp, CMT
Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock.
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