One of the best performing sectors over the past year has been cybersecurity. As the artificial intelligence build continues, the cries for more regulation grow louder. While that could slow down the speed of growth with data centers and the tech buildout, it makes cybersecurity more important. Cybersecurity favorites CrowdStrike (CRWD) , Fortinet (FTNT) , Okta (OKTA) and Palo Alto Networks (PANW) have all gained over 100% year to date. They have been best in class, but now the tide is starting to lift all boats within the sector and that spells opportunity for some of the laggards. One of those names starting to come to the surface is Zscaler (ZS) . Zscaler spent much of the year in Wall Street’s penalty box. Shares fell as much as 65% from its 52-week highs and remain lower by 13% this year. However, when looking at the chart, things are starting to turn around. Let’s break it down. Rotation This has been a recurring theme in the current bull market. We have seen it from sector to sector and within sectors themselves. In this Relative Rotation Graph* we highlight the strength amongst the biggest cyber stocks in the market. What we look for is a stock with improving momentum but has yet to take that leading role. Then we dig deeper into the charts of all the above names looking for the stock with the best risk/reward setup. This brought us to Zscaler. The setups First, we examine the one-year daily chart. We see a clear bottoming formation which appears to be resolving upward. Price action has taken the necessary steps to break the downtrend and is poised to reverse much higher. Positive momentum remains in its RSI and the MACD is showing a bullish crossover just as price is breaking a major resistance level above $195. The risk/reward on the daily chart is quite appealing. Use the rising 50-day moving average, which coincides with the 200-day moving average, as your support level. If shares re-test this level buyers should step in around $165. If it fails to hold, set stops accordingly as the trade has failed. Next, we use a longer time frame to confirm our thesis by looking at the weekly chart on a five-year basis. When we back things out to the longer-term view we see how the stock has reached — and is now attempting to breach a major consolidation area. The weekly chart confirms our bottoming thoughts. We see a classic double bottom formation that has resolved higher breaking the primary downtrend along the way. Again, we have a clear breakout with definable risk/reward metrics in place. To monitor downside risk use last week’s gap and recent low as your stop loss area. That coincides with our support on the daily chart. The trade It’s never easy to chase stocks after a significant run, but here we see potential rewards that far outweigh the risk. This reminds me of many of the beaten down software stocks — MSFT, PLTR, SNOW – that bounced off their lows and continued their runs higher. We have highlighted the downside risk just in case the current breakout doesn’t hold, but let’s talk about that potential reward. That’s why we are here. Upside targets to the $250/$265 area are plausible. A rally should take shares back to levels where they initially broke down, giving investors a 25% to 30% upside. If shares just rally back to breakeven for 2026 it brings the stock to $225. Based on analyzing price on multiple time frames and seeing renewed relative strength within the sector, the scales are tipped in favor of a stronger rally. Jay Woods, CMT with Chase Games *Relative Rotation Graph (RRG) plots securities based on relative strength and relative momentum versus a benchmark. The horizontal axis measures relative strength: securities to the right are outperforming the benchmark, while those to the left are underperforming. The vertical axis measures relative momentum: securities above the midpoint have improving relative momentum, while those below have weakening momentum. The midpoint, typically 100 on both axes, represents neutral relative strength and momentum versus the benchmark. Together, the axes create the four quadrants: Leading, Weakening, Lagging, and Improving. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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