Trading Okta stock requires a cool head and watchful eyes on the moving averages that matter, says Brian Shannon, founder of alphatrends.net.
Shannon says he's seeing security software names like Okta stock bottom out from a tight consolidation pattern that began in early September, with the pullback indicating the optimal buy-in time was on Monday.
The employee management and cybersecurity stock, which specializes in managing software for workers in a company, is a staple in American enterprises. In its last earnings report in August, the company said it saw growth from artificial intelligence companies like C3.AI.
To properly assess stocks, Shannon says he uses multiple short-term time frames, particularly 30-minute and 15-minute charts, to first analyze a stock's key levels. He then looks at the five-day moving average.
"I've got a cardinal rule: If the five-day moving average is declining, I just am not going to buy it," Shannon tells Investor's Business Daily's "Investing with IBD" podcast. "If it's advancing, I will not sell short but wait."
"That has saved me more money than anything I have done in my career," he said.
Okta Stock Not Yet A Buy
For Okta stock, Shannon says those gauges tell him to wait. "It probably needs two to three days to set back up," he said, citing highs and lows in Okta that are persistently lower than prior days.
The stock still has potential, he says, citing Okta stock's hold on the 20-day moving average, which is above upward-sloping 50-day and 200-day moving averages.
Okta was Investor's Business Daily's Stock Of The Day earlier this month after shares approached a buy point as the company held its annual customer conference. The company is ranked No. 5 in IBD's Computer Software-Security group and holds a Composite Rating of 98 according to IBD Research.
Zscaler Stock Shakes Out
Shannon sees a similar story playing out in shares of cybersecurity company Zscaler, an Okta stock peer. "If it could recover quickly and then digest for a gain up in that 170 area, that would make me like it even more," he says. Zscaler stock might be shaking out and leading to a potential recovery, but Shannon needs to see proof. "It has to recover, turn sideways and give me a nice higher low to protect myself against if I'm going to buy it."
For those who have missed the rally in Zscaler stock, there still could be chances to buy in the future, Shannon said, citing higher highs, higher long-term trends and strong institutional support.
Audio Version Of Podcast Episode
The Right Measurements For The Right Job
Measuring a stock's performance with the wrong moving averages is like using a yardstick to build a house measured in meters, says Shannon. "You couldn't get that eighth of an inch, 16th of an inch increments and make sure that refrigerator fits."
"You just can't get that same type of detail and accuracy, and that's what it all comes down to, making sure you're not weighing one thing more heavily than it should be and putting an equal weight across price data," he said.
While the multitude of time frames to track can be intimidating at first, Shannon says picking it up will eventually become second nature, like driving a car. "When you first start driving, looking at all those things can be intimidating," said Shannon. "I've got to check my rearview mirror, side mirror, check my speed and how much gas you have."
But persist, and Shannon says the time frames yield better insight on when stocks are set to move, especially for swing trading in securities like Okta stock. "I might look more closely at the tachometer and say, hey it's time to shift."
Follow Mike Juang on X, formerly Twitter, at @mikejuangnews.
