NetApp Facing Possible Resistance Ahead Of Earnings

Data storage firm NetApp (NTAP) is set to report fiscal fourth quarter and full year 2021 results on June 2. The current consensus estimate calls for a decline in earnings of 5.9% compared to Q4 of 2020. The current revenue estimate points to a small increase of 7%. The earnings and revenue growth have been an issue for NetApp over the last few years, but most other areas of fundamental analysis are pretty strong.

When I first started researching NetApp ahead of the earnings report, the first thing that jumped out at me came from the chart. Looking at the weekly chart, we see that the stock has been on a huge run over the last 15 months or so. However, it could be facing some resistance from an old high from back in September ’18. That high marked the beginning of what would become a downwardly sloped trend channel that saw the stock fall almost 60% from the high to the low. The upper rail connected the highs from 2018, 2019, and early 2020.

NTAP Tickeron TM.png

NetApp eventually broke out of the channel in November and it continued to rise rather quickly, but now it’s facing the possible resistance from the old high. The $80.53 level reached in 2018 isn’t an all-time high, but to find the all-time high you have to go back to 2000. NetApp peaked at $126.03 in October 2000 and within one year the stock would lose over 96% of its value. The stock dropped to a low of $4.95. I should mention that the prices reflected on the chart from Stockcharts.com are adjusted for dividends and splits.

In addition to the potential resistance at the old high, I’m a little concerned about the high readings on the overbought/oversold indicators. The 10-week RSI is just below the 70 threshold that indicates oversold conditions. The stochastic indicators are above 90 and firmly in overbought territory.

All the points made about the technical analysis thus far have been about the weekly chart and indicators. If we look at the Tickeron Technical Analysis Screener, we see that several daily indicators have generated bullish signals in the last week.

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