CrowdStrike stock is back within spitting distance of all-time highs, buoyed by a steady drumbeat of analyst optimism and a carefully orchestrated apology tour. But the stock is still warding off some investors despite its impressive recovery.
"When you're dealing with something that's got massive volume and the rally back, I'm going to be immediately suspicious," David Cox, senior portfolio manager at Raymond James Ltd. in Canada, told Investor's Business Daily's "Investing with IBD" podcast. He says that for now CrowdStrike has two things working against it: a strong sell-off and a lack of a long-term market history.
CrowdStrike Stock Takes Damage From Outage
CrowdStrike saw a major sell-off in July after a botched software update led to widespread computer crashes, preventing Windows machines from functioning and making recovery difficult. The crash affected major companies, hospitals and institutions, with Delta Air Lines canceling flights and stranding passengers due to the lockups.
Audio Version Of Podcast
Shares of CrowdStrike plunged more than 30% in less than a month after the crash, accompanied by heavy selling volume. CrowdStrike stock still remains around 7% off its all-time highs hit in early July before the computer crashes occurred.
In a shorter trading range, the plunge also formed a deep cup-with-handle chart pattern with a 323.94 pivot, a key level CrowdStrike stock hit in November. Shares have since wavered, sometimes just below a potential profit zone from the pattern.
CrowdStrike has been consolidating for a few weeks, finding support recently at the 50-day line. Investors could view 389 as an alternate handle entry, with 370.37 as an aggressive buy point. After Friday, the alternate handle will qualify as its own flat base within the larger consolidation.
CrowdStrike Stock Comes Back, But May Not Be Enough
But for longer-term traders like Cox, CrowdStrike's return near all-time highs can raise an eyebrow. He says stocks with steep and heavy declines may be going through a "character change," making it more fruitful to step off after a stock peaks rather than waiting to see how the damage will affect a stock long-term.
Cox says stocks that go through such character changes may first need to go through a period of consolidation, where it's best to let other investors take on the burden.
A wear-and-tear period may not necessarily apply to CrowdStrike stock, but its shorter market history makes it harder to judge the stock's level of change, Cox says. "Maybe I like the group, maybe cybersecurity is great," he said. "I'm going to want to know what other leaders are that might have volatility in favor" but don't have a decline to work against.
Tap here to learn more about finding long-term investments for traders with patience.
Follow Mike Juang on X at @mikejuangnews and on Threads at @namedvillage.
