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Market speculators should consider cybersecurity specialist SentinelOne (NYSE:S), mainly because of the spectacular failure of rival CrowdStrike (NASDAQ:CRWD). It may take some time for the CRWD stain to fade. In the meantime, S stock looks very attractive.
Let’s look at the core fundamentals: As stated in their public profile, SentinelOne is a cybersecurity provider focused on protecting endpoints, cloud workloads, and identity credentials for enterprise-level clients. The company uses artificial intelligence and other advanced protocols to detect and respond to digital threats. See CrowdStrike’s profile. The words are different, but the business is the same.
Why does this matter? CrowdStrike is reeling from a system failure that has caused widespread disruption across a range of industries, and its CEO has had to testify about the impact on critical infrastructure like air transportation and healthcare.
But that doesn’t mean businesses can ignore endpoint security. With digital threats lurking everywhere and the average cost of a data breach rising, it would be foolish to neglect protection. In a head-to-head battle, CRWD loses and S stock prevails.
SentinelOne has the advantage in terms of technicals
As traders can imagine, the technical profile of S stocks has been bullish amid the CrowdStrike debacle. Over the past five sessions since Monday’s close, SentinelOne has risen more than 6%. Over the same period, CRWD has suffered a devastating loss of more than 30%.
Beyond the historical price data is the recent chart movement. According to Barchart, S stock was spotted as a potential opportunity on the J-Hook screener on Monday. Essentially, a J-Hook is a phenomenon where a publicly traded asset experiences a see-saw action. At the end of this sine wave pattern, a decisive breakout can materialize.
Chart source: TradingView
As with any technical indicator, there is risk involved as no indicator is perfect, but Barchart uses a nine-step criteria before identifying an asset as a J-Hook opportunity.
Based on Monday’s price action, S shares rose to an intraday high of $24.80, a clue that bulls may target resistance at the previous support level of $25. Also, $25 is one-quarter of the way to $100, a psychologically important milestone.
Today’s trade: Buy long maturity call options on S stock
Given the fundamental tailwinds and technical J-Hook signals, there are many ways to trade S stock. However, in today’s trading, investors can consider longer maturity call options. Specifically, we are looking at the January 17, 2025 call option at $25.
As mentioned above, Monday’s price action suggests that $25 is the next logical target for bullish traders. Therefore, if choosing to go the options route, it is important to find a contract that has enough time for the trade to realistically succeed, and that is out of the money (OTM) which could allow traders to be profitable.
The main risk factor to keep in mind is that technical support lies at $22. Therefore, S stock could fall to this point. At the same time, CrowdStrike could lose market share as it loses trust from organizations. This could be the fundamental driving force for SentinelOne to return to its previous highs.
As of the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author in accordance with InvestorPlace.com’s Publishing Guidelines.
On the date of publication, the editor in charge did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Josh Enomoto, a former Senior Business Analyst at Sony Electronics, has been involved in brokering major deals with Fortune Global 500 companies. Over the past few years, he has provided unique and critical insight into the investment market as well as various industries including law, construction management and healthcare. Tweet us at @EnomotoMedia.
