Nasdaq-100 component Symantec Corp. (SYMC) has attracted solid buying interest so far in 2017, underpinned by high-profile hacking attacks across government and private venues. The company’s long history as a cybercrime pioneer has pushed CEO Greg Clark into the media spotlight, generating free publicity for a wide suite of products including the groundbreaking Norton Anti–Virus.
The company has exceeded analyst expectations in the last three quarters despite well-publicized misses by rivals including FireEye Inc. (FEYE), which fell nearly 16% in a single February session after reporting a shortfall. Meanwhile, the recent LifeLock acquisition is receiving positive reviews, raising hopes it will increase sales in the company’s Norton division, which has struggled over the past few years due to intense competition.
SYMC Long-Term Chart (1994–2017)
A powerful 1980s uptrend topped out at $6.38 in 1992, yielding a decline that reached 74-cents just eight months later. The stock traded between those narrow boundaries for the next seven years, finally breaking range resistance at the start of the new millennium. That buying impulse was short-lived, generating a March 2000 high at $10.20, at the height of the Dot-com bubble. It then turned lower with the rest of the tech universe, bottoming out in December at $3.42, ahead of rangebound action that continued into a 2002 breakout.
The subsequent trend advance continued into the December 2004 all-time high at $34.05, ahead of a severe downturn that continued into 2006, despite broad tech sector gains during the mid-decade bull market. The stock broke 5-year support in the mid-teens when the bottom dropped out in October 2008, plummeting to a multiyear low at 10.05 at the end of the year, ahead of a recovery wave that took five years to complete a round trip in the 2008 high.
That rally stalled just above the .618 Fibonacci selloff retracement level in the mid-20s, giving way to a broad sideways pattern that tested the high in the first quarter of 2015. Resistance held firm, attracting intense selling pressure that dumped the stock to a 3-year low at $16.14 in the first quarter of 2016. A strong bounce off that low reached 2013 resistance for the second time in January 2017, triggering a breakout that’s now extended within three points of the 2004 high.
The monthly Stochastics oscillator reached the overbought level for the first time in two years in October 2016 and is now grinding sideways in support of the strong uptrend. However, this positioning predicts a significant reversal after the stock enters a test at 12-year resistance in the mid-30s. The 2016 rally carved a single basing pattern in the mid-20s, suggesting a decline will target that support level in coming months.
SYMC Short-Term Chart (2015–2017)
The last rally leg lifted above the .786 retracement of the 2004 into 2008 downtrend, predicting it will complete the 100% round trip into $34.05. That level should attract committed sellers, triggering a topping pattern or reversal that discourages current shareholders. While support in the mid-20s presents the high odds downside target, the Elliott 5-wave rally pattern off the March low also exposes the August 2016 gap between $21 and $21.50.
On Balance Volume (OBV) bottomed out in 2013 and lifted at a sluggish pace into the middle of 2016. Accumulation then rapidly escalated, pointing to renewed institutional sponsorship consistent with an emerging uptrend. This bullish divergence should provide a stiff technical tailwind that limits the downside during a correction, which could unfold in the second quarter.
The Bottom Line
Symantec has rallied above long-term resistance in the mid-20s and is headed toward a critical test at the 2004 all-time high in the mid-30s. Overbought long-term technical readings suggest the stock will reverse at that level and drop into a test of new support, offering a buying opportunity for long-term market players.
<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>