Nancy and Paul Pelosi have been in the news again. Not for Nancy’s political prowess, but instead for Paul Pelosi’s uncanny timing in buying and selling stocks.
The businessman and owner of the Sacramento Mountain Lions – a United Football League team – has been killing it in the market as he’s successfully timed huge moves in a number of stocks, including Nvidia (NVDA), Microsoft (MSFT), and Apple (AAPL). The last one hasn’t played out well just yet, check out my article from Monday on why right here.
A few weeks ago, the Pelosi’s bought shares of Palo Alto Networks (PANW). The company provides internet security measures and is a big contractor with the government. Investors cry foul on the Pelosi’s because their timing appears to be based on “insider knowledge,” not this time.
According to Capital Trades, Paul Pelosi bought $500k to $1 million in PANW stock on February 12. This was less than a week before the company’s earnings call, so things seemed a little suspect.
Then came the results, and they didn’t go the way the Pelosi’s thought it would. Palo Alto results missed on both the top and bottom lines and company’s management guided their expectations lower.
It was a triple whammy for investors in the stock that sent shares almost 30% lower the next day.
It appears that Mr. Pelosi is watching the same trendlines that you and I watch. Two days later, with the stock bouncing off its 200-day moving average – one of the three trendlines I talk to you about a lot – Mr. Pelosi bought another $250k-$500k of PANW shares. We call this a “dollar-cost average” approach to lower average share price when a stock moves against you.
Today, that investment has hope for getting back to break-even, but there’s one strong technical trendline standing in the way… the stock’s 50-day moving average. Here’s the chart.
PANW’s 50-day moving average sits just above the current price at $325.
It should be expected that short-term traders would come in and “buy the dip” in the stock as it found support at its 200-day ($260), but there is also a high likelihood that those same traders that bought at $260 will start to take their current profits of around 20%.
A rejection at current prices will likely mean that PANW shares will fall back to $275, erasing some healthy gains from the apparent dollar cost averaging move that Mr. Pelosi made at $260.
Bottom Line
Simply put, the $325 price is a must win for Pelosi’s short-term position.
If you’re considering a position in PANW, you may want to give this a few days or weeks to play out as better prices appear to be in the cards for Palo Alto Network’s shares.
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About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.
