Fire Eye (FEYE) is a cybersecurity firm that has had its share of ups and downs (in stock price). The company has been spending tremendous amounts of money on R&D and is generating strong revenue, but has been very bad at meeting/beating earnings estimates. 2014 saw shares fall from a high of 97.35 to a low of 24.81. It's safe to say that investors lost their patience with the name, and I wasn't surprised to see steady selling in the shares to end the year as tax loss selling likely consumed trade.
But, I'm seeing some things in the stock since the start of the new year that I think bear notice, and make FEYE a strong speculative pick for the rest of the year.
- It's been a relative outperformer compared to the major indices, up 13.55% compared to the SPY (down 1.36%) and the QQQ (down 1.39%). You could argue money is coming back into the name that left it for tax loss selling reasons at the end of 2014
- As option trading in the name is very active, implied volatility has been a leading indicator of trader sentiment in the stock. In the chart below, I note how the current rise in implied volatility may be signaling the start of a bullish move higher
- Finally, there appears to be a bullish butterfly harmonic pattern taking place, that would target the $40 price level within the next 20 days.