CrowdStrike stock is surging to all-time highs, boosted by strength in the cybersecurity industry. From a certain point of view, the move may provide an appealing entry for aggressive traders operating on a shorter time frame.
"This actually is a classic William O'Neil base breakout," Tom Carr, founder and CEO of Befriend The Trend Trading, tells Investor's Business Daily's "Investing with IBD" podcast, referring to IBD's founder. He says CRWD stock formed a tight base over the last two weeks and is clearing that narrow, sideways area this week.
Audio Version Of Podcast Episode
However, shares are now more than 20% above their 50-day moving average. That extension, coupled with the fact that this base took place over several short weeks vs. five or six weeks, makes an entry at these levels on the aggressive side.
Having a shorter time frame, meaning taking profits quicker and cutting losses faster, can be helpful for riskier entries. On the cutting losses side, selling when a stock is down 3%, 5% or a maximum of 8% from one's purchase price is sound risk management.
CRWD stock has a stellar Relative Strength Rating of 98, and is currently ranked No. 1 in the Computer Software-Security industry group according to IBD Research. CRWD stock has a perfect IBD Composite Rating of 99.
Finding The Objective Truth In CRWD Stock
For longer-term investors, CRWD stock may not be providing a new entry point. The market is currently in the grip of a "lockout rally," making it harder to enter stocks that are working, but providing upside to those with existing exposure to the right names.
"It's a market of cognitive dissonance," said Carr. "That's a bit of a mouthful, but it simply means there are a number of things going on in the market that seem to be contradictory." He points to indexes like the S&P 500 and Nasdaq 100 hitting all-time highs even as the number of stocks hitting those highs shrinks.
To determine a "true" picture of the market, Carr says he relies on charts as an objective source of reality, based on the philosophy of medieval scholar St. Thomas Aquinas.
"Aquinas defines truth as what happens when the image inside my head of what I'm thinking about matches the reality of the actual thing," said Carr.
He relies on the price chart "because I don't know whether the reality in my head actually matches unless I have some third objective viewpoint that tells me so."
Buying CRWD Stock High And Selling It Higher
Carr says CRWD stock's chart performance also adheres to a long-standing tenet from IBD founder William O'Neil: not buying stocks near their lows, but buying stocks coming out of bases and making new highs.
"We have to trade what the market gives us, and we've got a three-week-type base with a breakout today on very good volume," said Carr on Wednesday, referring to Crowdstrike's 5.2% gain in above-average volume. "That should see some follow-through."
Shares indeed did follow through on Thursday, adding 1.7% to the stock's upside move.
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