CrowdStrike’s Chart Is Showing Caution Signs Ahead of EarningsCloud-based cybersecurity firm CrowdStrike Holdings NASDAQ:CRWD is set to release fiscal first-quarter results after the bell next Tuesday (June 3). Let’s check out the company’s technical and fundamental picture heading into the report.
CrowdStrike’s Fundamental Analysis
I'm not going to lie -- I’ve been long CRWD for a while and the stock has been very, very good to me. However, I see some reasons to be cautious moving forward.
At last check, the Street was looking for the firm to report $0.66 in fiscal-Q1 adjusted earnings per share on $1.11 billion of revenue. That would compare less than favorably to the $0.93 in adjusted EPS that CrowdStrike reported in the same period last year.
On the other hand, $1.11 billion in revenue would represent 20% year-over-year growth for the firm.
However, look at those two figures together and they appear to point to some margin compression. Additionally, 20% y/y sales growth -- while nothing to sneeze at -- would represent sequential deceleration of growth from the quarter just prior.
As a matter of fact, that would mark a fourth consecutive quarter of slower year-over-year growth from the prior 13-week period.
If that's not enough of a concern, all 32 sell-side analysts I can find that cover CrowdStrike have lowered their earnings estimates for the current quarter since it began.
CrowdStrike’s Technical Analysis
I charted CRWD for a different publication a month ago and pointed out what looked at the time like a “double bottom” pattern of bullish reversal.
That set-up worked like a charm, but I’m less confident in what the stock’s chart is showing us now:
True, readers will see still the double-bottom pattern of reversal that I mentioned, marked with two green boxes at left and showing a $392 pivot that stretched from late February into mid-April.
But at CrowdStrike’s recent $474.23 high, the stock was up 28% from that pivot. That’s often close to or even better than what one can expect to get out of a breakout.
And now, we see a so-called “rising-wedge” pattern of bearish reversal developing on the chart’s right side, as denoted with a red box above.
True, CRWD took back its 200-day Simple Moving Average (or “SMA,” marked with a red line above) as it climbed from the stock’s early April lows. The stock also retook also its 50-day SMA (marked with a blue line) and 21-day Exponential Moving Average (or “EMA,” denoted by a green line) during that period.
All of that means the stock should historically see some support on the way down, but we're still talking about a 13% drop before the 50-day line comes into play.
Meanwhile, CrowdStrike’s Relative Strength Index (the gray line at the chart’s top) remains strong, but its daily Moving Average Convergence Divergence indicator (the black and gold lines and blue bars at bottom) is sending mixed signals.
The MACD’s 9-day histogram (the blue bars) has been flipping back and forth in and out of negative territory for almost a month, while the 12-day EMA (the black line) has been wrestling with the 26-day EMA (gold line).
When the gold line is on top of the black line, that can be bearish, especially when the 9-day EMA slips below zero.
For the bulls to win out, it appears necessary for CrowdStrike to hold onto both the rising wedge’s bottom trendline and the stock’s 21-day EMA. And for the bears, those two points would serve as your downside pivots.
Should you take profits here? That's up to you.
But at the very least, the above chart seems to show that CrowdStrike investors should proceed with caution.
(Moomoo Technologies Inc. Markets Commentator Stephen “Sarge” Guilfoyle was long CRWD at the time of writing this column.)
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