Cloudflare: Keep your feet on the ground or chase the breakout?

Shares of Cloudflare (NET) rose sharply on Friday morning after the company, which acts as a VPN giant, gave upbeat guidance. Let’s check the charts to see how far this jump can go.

In the NET daily bar chart, below, we can see that the stock bottomed in June and is moving higher ahead of Friday’s higher gap. NET is trading above the bottom of the 50-day moving average. The slope of the 200-day line is negative and crosses to the upside around $105.

The On-Balance-Volume (OBV) line has shown some uneven progress since mid-June. The Moving Average Convergence Oscillator (MACD) rises above the zero line for a definite buy signal.

In the weekly NET Japanese candlestick chart below, we can see some positive clues. It looks like the $45 area is now a support area.

The weekly OBV line shows some improvement in July after a long decline. The MACD Oscillator has crossed up for a cover buy signal.

In this daily NET points and figures chart, below, we can see a price target in the $82 area.

In this weekly NET points and figures chart below, we can see a target in the $79 area.

Ultimate Strategy: NET diverged higher on Friday, but weakness in the broader market averages could drag NET lower in the coming days. Although the dot and figure charts suggest higher profits, I would not recommend buying NET stock. This is not the time to chase the breakouts to the upside.

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