CRWD CrowdStrike Daily Chart; Oversold; Positive Divergence Developing; Potential H&S; Potential Island Reversal; Gap

CrowdStrike is another hotshot stock nowadays. It is a company with its head in the cloud and everyone says it is the best thing since sliced bread. Barron's calls it a top pick. Pause for laughter. Keystone has heard many folks repeat the same story over the years that they followed some of the so-called Barron's tips only to lose their shirts. Barron's is a fade.

CRWD has ran to the moon like other tech stocks; the employees walk proudly in their fleece sweaters sporting the company logo. Price pulled back to a bottom at Labor Day and then off to the races higher again with the buy the dip crowd tripping over each other to buy Crowd. Boom. The orgy gets wild as price gaps-up from 450-ish to 470-ish. If you went to the can, or stopped at the break room for a cup of coffee, by the time you returned to your desk, CrowdStrike was 20 bucks higher. The bulls got even more excited jamming price to the record top at 565-ish in an orgy so obscene it would make Caligula blush.

But alas, all party's end, and the orgy was over due to the negative divergence (red lines). Price prints the record high but all the chart indicators are sloping down, negatively diverging away from price that is moving higher. The neggie d is always correct and voila, price receives the spankdown in the daily time frame.

When price gapped-up to 470, it remains above, thus, it is on an island above 470, with a coconut tree. Keith Richards fell out of a coconut tree. Respectable. That's rock 'n roll. All gaps get filled eventually. Thus, mathematicians say thus a lot, that is why Keystone did not receive an invitation to the fun New Year's party Three Doors Down, price will either drift lower to fill the gap at 450-470, or, price will collapse from 470 to 450 in a heartbeat, gapping-down, thereby creating an island reversal pattern. You can watch to see which scenario plays out. The bulls want to delay either outcome by sending price sideways.

The potential head and shoulders (H&S) pattern has a head at 560 and neckline at 470-ish. If you drill down closely, you can see that the armpit touches are more like 476-ish, exactly where price is now. It is deciding if it can bounce, or if it will die and allow the H&S to play out. The distance from neck to head is 85 to 90 points so a collapse through 470-476 would target 380-390. You can play around with the numbers.

So all that mumbo-jumbo above is the backdrop to CrowdStrike's drama. What is the path ahead? The weekly chart is weak so more lows would be expected going forward on the weekly basis that means that the H&S will play out over the weeks ahead. However, the daily chart above is trying to set up with positive divergence to allow a relief rally for a few days or week or two first. CRWD is trying to hold the line at 470-476 with all its might.

The problem is that possie d cannot set up unless price makes a lower low and that would mean it would have to drop below the 470 neckline. CrowdStrike may be putting off the inevitable with the sideways stutter the last couple weeks. It is likely time to take the medicine. The expectation is for weaker prices going forward this year. The weekly chart wants some more downside but the monthly chart is also nothing to write home about and this is likely a stock that you do not want to own for the long-term, despite what every analyst and television pundit tells you. Keystone is not long or short CRWD and has never played it.

Day traders can watch the above set-up description and play the possie d on the daily for a quick upside trade, when it sets up, that would be risky and require nimbleness. There are better trades to play. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision