Author: Andrew Keene
Palo Alto Networks, Inc. (PANW) is an IT security company who’s platforms offer users a range of security products and services. The company’s stock is currently trading around $172.35 in a 52 week range of $108.10-$200.55. The stock has been performing extremely well this year with shares rallying over 40.50% year to date. The company is set to report their most recent quarterly eanrings report today after the bell and based on a number of metrics the stock appears to be primed for a move higher on the release.
PANW has rallied on earnings day 10 of the past 12 quarters with an average move of 5.78%. The stock is also beginning to look stronger on a chart. The stock is in a solid bull trend higher from recent lows and the stock is approaching the top of the Ichimoku Cloud indicating a potential for a bullish upside breakout. Market makers are expecting the stock to move about $11.00 up or down by Fridays close. This would imply a move of around 6.6% meaning that expectations are in line with historical averages. With the stock trading well on a chart and the historical movement showing a clear bullish bias I will look for a bullish trade setup in PANW.
Using the market makers implied move I can calculate an upside target for PANW on Friday’s close. Remember, the market closes early on Friday for the holiday so I will need to manage this trade early. My upside target will be $183.35.
Potential trade: Buying the PANW Nov 27th Weekly 180-185 Call Spreads for $1.15
Risk: $115 per 1 lot
Reward: $385 per 1 lot
This trade has better than 3-1 reward to risk ratio and expires this week.