Fastly - Optimum Entry Point For The Next Rally

Summary

• Fastly has had a rally of 321% YTD. However, three technical indicators have emerged – resistance level, rising wedge and overbought RSI – signaling the rally may be over.
• It remains a well run company with a good balance sheet, quick ratio, cash at hand, etc. and proportionally outperforms its larger competitors.
• It has the potential to outpace its peers and return a higher profit for investors, particularly as the profit margin it is charging is lower.
• The price is likely to rise further once it breaches the resistance level of $87. It would be better to take a position once this movement is confirmed as established.
• To mitigate risks, it’s best to await a minimum 3% penetration above the current price ceiling to $90 and enter on a pullback for a better entry point.

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This article covers my ideas for investing in this stock. Having recently sold my investment, my thoughts are turning towards what next for Fastly (NYSE:FSLY) and my investment ideas for it. Is it a good stock to reinvest into, if so when and why, or has the stock reached its optimum price level?

Investment Thesis

My investment thesis in summary is this: Fastly is a good investment (or reinvestment) opportunity once certain conditions materialize.

Fastly as recently as the week of 03 July reached a share price resistance level of around $87, along with two technical indicators signalling a fall: A rising wedge formation and an overbought RSI. However, it remains a well run company with good fundamentals and I have a positive forward looking outlook on it.

My approach is to marry a strong forward looking outlook, based on fundamentals, with technical indicators in order to mitigate risks and take advantage of better investment share price entry points. With this in mind, a better approach to investing in Fastly would be to mitigate the risks of downward moves shown by the technical indicators and await the price to establish itself above the $87 resistance level, and purchase then.

The definition of "established above $87" can vary depending on the investor's risk appetite and general outlook. However, my definition would be to await a minimum 3% penetration above $87 to around $90 in order to avoid a bull trap, and time the purchase on a pull back to obtain a better entry point and also to retest $87 as a level of support.

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, but may initiate a long position in FSLY over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.