Cloudflare Inc (NYSE:NET) shares were last seen down 4.8% to trade at $213.35, heading for a fourth-straight loss.
Despite a June 4 record high of $276.63, Cloudflare has suffered an 11.7% drawdown in June
The upside, however, is the stock is testing support at the 50-day moving average, which has a history of yielding strong positive returns. According to Schaeffer’s Senior Quantitative Analyst Rocky White, NET is trading within 0.75 times the 50-day moving average’s 20-day average true range (ATR), after spending at least 80% of the previous two weeks and 80% of the prior 42 trading sessions above that trendline. This setup has appeared nine times over the last decade, after which the stock was higher one month later 67% of the time, averaging an impressive 9.6% gain.
A comparable rally from current levels would place Cloudflare stock at $233.83. An unwinding of pessimism amongst options traders could provide tailwinds as well. NET’s 10-day call/put volume ratio of 0.91 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks higher than 86% of readings from the past year, so while calls are still winning out on an absolute basis, puts have been much more popular than usual.