A strong gain Wednesday by Fortinet (FTNT), today’s showcase in IBD 50 Stocks To Watch, bolsters the argument that business software stocks should not be ignored after a spectacular run through the summer.
The expert in firewall and virtual private network security products started its first big run in November 2017. That’s when it broke out past a 41.66 correct buy point in a 17-week flat base. By October 2018, Fortinet reached a high of 94.37, a 127% gain from the entry.
After hitting that price level, Fortinet shares took a long break. As the weekly chart shows, a large cup with handle formed. That generated an 88.70 buy point. But the breakout during the week ended April 12 this year proved not as fruitful. After a quick 9% gain, Fortinet turned tail and fell through its 10-week moving average, which was a sell signal.
And when the stock fell 8% from the buy point, it also triggered the golden rule of investing: Cut losses at 7% to 8% on every trade. Doing so preserves your capital and opens an avenue to a potentially better opportunity.
How about today? The stock is showing signs of mojo again. The stock is up more than 3% for the week, on top of a 12% jump last week that followed the company’s strong Q3 results, and volume is heavy. more