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Today, we’re opening a new bearish trade on FireEye (FEYE). Security and application software companies have not had a great quarter, and things got a lot worse yesterday with a warning from Fortinet (FTNT). The factors affecting FTNT are likely to be a major drag on FEYE, where profitability is already non-existent.
The break of support should send the stock back to long-term support as earnings approach. Implied volatility levels are already a bit elevated, but compared to similar setups in the past, the options are relatively cheap. We like the trade as a way to potentially take advantage of the shift from speculative to value stocks in the coming weeks as investors fret about earnings.
Buy to open the FEYE November 13 Puts (FEYE161118P00013000).
You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in our .
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