CIBR: Cybersecurity Stocks Surge Into Year EndIt has been a record year... for cyber extortion. Orange Cyberdefense data, detailed in a Bloomberg article this week, reveal that there have been four straight quarters of increased corporate victims of hacks and financial blackmails. Major recent cyberattacks include those on MGM Grand, Clorox, Boeing, and China’s ICBC just this year alone. It is all good news for companies engaged in protecting against the increasing threat of large-scale ransomware attacks, among other tech-based crimes.
While shares of CrowdStrike and Palo Alto Networks have been strong lately, investors can play the trend at a higher level through the First Trust NASDAQ Cybersecurity ETF (CIBR). The $5.9 billion fund has a moderate 0.60% expense ratio, and it pays a modest 0.3% dividend yield. The issuer notes that the portfolio’s price-to-earnings ratio is lofty at 27.7x, but Morningstar reports that the ETF’s long-term earnings growth rate is respectable near 10%. To boot, you also get some semiconductor chip exposure, too.
For traders, CIBR’s momentum has been off the charts lately. Up seven weeks in a row, the basket of cybersecurity names has risen from the low $40s to the mid- FWB:50S as we head into 2024. A key thematic play, with fundamental strength (see CrowdStrike’s earnings late last month), I see the potential for CIBR to continue to rally, though shares have historically consolidated over the first 10 weeks of the year. As it stands, I see support between $47 and $48 with another layer of potential buying activity coming into play at $43. On the upside, keep your eye on the November 2021 all-time high just shy of $57.
The ETF successfully held its rising 200-day moving average earlier this quarter, and the breakout through $47 projects a measured move price objective to $58 based on the rounded bottom formation from Q2 this year to the December near-term breakout. With a daily RSI north of 86, we could see CIBR cool off, but the broader trend remains constructive in my view, and new all-time highs are certainly in play over the coming weeks.
CIBR
CIBR Cybersecurity: M-pattern may retest 0.618 pivot near 34CIBR seems to be making a M-pattern & is now at 39, a 50% retracement. If the yellow zone does not hold 39, then the next will be the 0.618 pivot support at 34 which is also a 200% retracement of the latest rally.
34 is also located near the base of my slanted FIB CHANNEL. 34 may be the bottom of the ABC correction & the start of a new 5 wave uptrend inside this FIB CHANNEL.
After this correction, Cybersecurity & Defense stocks should do well in these times of geo-political unrest.
Not trading advice
Cyber Security has become essential for all"Because of the rise of remote working, cyberattacks have grown exponentially in recent months, with the FBI reporting a 400% increase in complaints in April versus March, as attackers hope to expose weaknesses in an organization's business continuity strategy"
Fundamental difference between some of the biggest cyber-security companies:
CrowdStrike's (CRWD) endpoint protection uses resource-friendly security agents to inform its crowdsourced cloud about any potential threat anomalies. All customers are protected based on a single threat found, and its technology is supported by having renowned threat remediation and hunting capabilities.
OKTA disrupted the identity access and management market with its cloud-based technology that has a large number of application integrations that make controlling who has access to what much simpler for security teams. In a perimeterless security world, the importance of identity is becoming paramount.
Zscaler's (ZS) secure web gateways delivered via its cloud locations provide customers a safe route to cloudbased resources. Branch and remote users can go directly to their applications instead of going through a centralized data center, decreasing lag for the end user and alleviating traffic bottlenecks for IT teams.
Palo Alto Networks (PANW) is an attractive option for investors. In our view, its cloud transition springboarding growth off its firewall leadership, upselling and cross-selling prospects via its security platform, and strong cash flow and balance sheet are being overlooked for the pure cloud-based companies.
Palo Alto Networks - buying dip?FUNDAMENTAL
PANW earnings guidance lagged its forecast, creating a 12% decline after hours.
Palo Alto said that it has agreed to acquire Aporeto, a machine identity-based micro-segmentation firm, for $150 million in cash. The company said its earnings projections include net expenses related to the proposed acquisition.
TECHNICAL
Both the 50sma and 200sma are working as support after the earnings report took PANW 12% after hours.
The 50sma is also looking to break the 200sma. Crossing of the 50sma over the 200sma could be a bullish confirmation of a healthy uptrend.
Will enter position if we can stay above the SMA's and enter the channel, formed by the most recent gap.
**Next short-term resistance area --> $228-$230.
VMware breaking its 200sma - beware...I am looking to enter a position in VMW, as it just crossed the 200SMA with good volume, and an uptrend RSI and OBV.
They report earnings November 26th, 2019; after hours. So be aware of the event. We will get a better understanding of how much it will move closer to earnings.
CIBR, which is an ETF of cyber-security is trending higher.
Analysts have a bullish fair value around $194.
***
The $COMPX (Nasdaq Composite) has strong technical RSI and OBV as well, but there was a bearish flash warning called the Hindenburg Omen, activate recently. Basically it means, that while there are many stocks near all-time-highs, there are also as many at all-time-lows, which is seen as a bearish indicator.
So I recommend a balance between tight stop-limits as well as selling at least 50% when we reach the first profit-exit goal.
Bullish on Cybersecurity We are becoming more and more dependent on the internet. Along with this increased dependence the social desire for cyber defense will grow. Even at high costs the demand and necessity will be strong.
A single company will not monopolize security of the internet - it's too big and too complex - but I do think a broad index of companies building the "immune system of the internet" can benefit from this trend.
Supporting this trend are:
continued political cyber warfare & allegations lawfareblog.com
the release of CIA Hacking Tools ("zero day" exploits etc.) wikileaks.org
Hospital ransomware attacks - speaking to someone working in hospital data - hackers taking control of hospital data and holding it as ransom is more common than many of us are aware of. "The Federal Bureau of Investigation (FBI) reported a fourfold increase in ransomware attacks from 2015 to 2016. Those attacks resulted in a total of $1 billion being paid to hackers, the FBI said." medlineplus.gov
The Elliott Wave and technical analysis perspective:
Two cybersecurity ETFs $HACK & $CIBR have been trending in a bullish channel since 2015 and 2016 respectively, after tracing out a clear zigzag corrective patterns on long-term charts.
The two primary counts suggest further fifth wave upside at Intermediate or Minor degree.
The leading count is in red on the $HACK chart and depicted on the CIBR chart. Wave 3 is extended and wave 5 has begun tracing out the initial first and second waves.
The alternative count in blue on the $HACK charts illustrates an extended fifth wave in which Minute waves ((i)) and ((ii)) are complete and the initial first and second waves of wave ((iii)) of 5 are near complete suggesting a (iii) of ((iii)) of 5 spike is possible soon. $31.50 - $32.00 would be the first target zone.
RSI on $HACK is just shy of bullish territory and has been trending bullish with lower highs since February 2016.
Volume on $CIBR is trending up with higher highs suggest there is building strength for further upside.
