Buy the Dip in CrowdStrike Stock on Earnings Selloff

-- CrowdStrike is selling off despite a strong quarter and solid guidance. Combined with nearby support, this one is a dip-buying candidate. --

By Bret Kenwell, TheStreet.com

CrowdStrike (CRWD) stock is trading lower on Wednesday after the company reported earnings on Tuesday evening.

The stock initially rallied off the lows but is back near session lows and down about 3% so far on the day.

That's despite the company reporting a top- and bottom-line beat with sales growing almost 70% year over year.

Even better? Revenue guidance for its fiscal third quarter and the full year topped analysts' expectations, with management boosting its full-year outlook for the second time this year.

Analysts are ratcheting up their price targets in response -- and the stock is moving lower on the day.

Clearly, cybersecurity has been in demand, as Palo Alto Networks (PANW) recently reported a strong result and saw its stock explode to the upside.

Trading CrowdStrike Chart

Daily chart of CrowdStrike

Chart courtesy of TrendSpider.com

I'm not one to fight price or a trend. If the stock wants to go lower, there's nothing I - or virtually anyone - can do about it.

That said, there are times where one can believe the reaction is wrong. Acting on that thought is difficult unless there are other reasons to justify a position.

I would argue that an earnings and revenue beat combined with an above-consensus outlook should result in a higher stock price, not a lower one.

When paired with support on the chart, this makes CrowdStrike stock a tempting dip-buying candidate.

Remember, CrowdStrike gave us a buying opportunity a few months ago when it dipped on earnings in June.

If we were talking about a dip to the 10-day moving average as the only support level, I would feel less confident here. Or if the report wasn't very good.

However, not only does CrowdStrike have this short-term moving average in play, but it's also got the prior breakout zone between $267.50 and $270.

With these two levels on watch and a solid quarterly report, aggressive bulls can buy today's dip.

Below $265, though, and the trade starts to fall apart.

That could put the 50-day moving average in play, followed by the key $250 level.

On the upside, let's see if CrowdStrike stock can clear $280. Above that puts the post-earnings high on the table, near $285.50.

Above the all-time high at $289.24 and the $300 to $302 area is a potential upside target, with the 161.8% extension coming into play near the top of that range.

For some traders, this may be too aggressive a setup and that's just fine. But for others, this is the type of risk/reward setup they crave.

From TheStreet.com