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Because The Chart
by Alex King
I sold off my last remaining position in NET on February 9, 2024. There were a number of reasons for that but first amongst them was the chart. Here’s the short-term chart - you can open a full page version, here.
Sometimes technical stock moves are very satisfying and this is one of them. The event was clearly a good earnings print - see below - but the stock landing on $110 as a center of gravity for the day had purely to do with two factors in my view. One, that’s the 200% Wave 3 fibonacci extension of the prior Wave 1 placed at the Wave 2 low - a big move up for sure but not uncommon in these high beta names. Two, look at the way the stock was pinned to $110 despite a big yo-yo range through the day on Feb 9. I don’t know why that is but often short-term-expiry options have something to do with that. Anyway, it’s a managed price to my eye and an obvious place for profit-taking, so I took it.
I love the Matthew Prince show as it appears in social media - a very confident guy happy to say that Cloudflare is a major AWS competitor and so on - but I don’t love his ability to hire and retain a sales team or sales head. They have churned through a number of such heads and the latest appointee is a former CEO of an old-line analytics business recently acquired by a leveraged buyout shop. He has been a board member of NET for some time. Unlikely to challenge Prince much nor hard-charge the revenue line anew in my opinion. None of this is fatal to the stock but it is an obvious operational flaw in the story.
Numbers, valuation and medium-term chart follows below.
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