Cloudflare stock (NYSE: NET) has been showing signs of weakening momentum, and I believe the current decline could be only the beginning of a much larger correction.
The weekly chart reveals an extended upward channel, but the latest leg higher is losing strength. In my view, Cloudflare is transitioning from a strong trend into a broader trading range, a development that could expose the stock to significantly lower prices.
Why I Shorted Cloudflare Stock
The first signal was a double top. I entered the short trade at the candle that formed the second top because the broader weekly chart was already showing signs of exhaustion.
The key factor was not simply the double top itself, but the structure surrounding it.
Cloudflare had been trading within a long, extended channel. However, each new high was followed by a retracement toward previous trading ranges. This behavior suggests that the latest upward leg is no longer behaving like a strong, sustained trend.
Instead, the stock appears to be developing a structure more consistent with a trading range.
Cloudflare’s Weekly Chart Shows Weakening Momentum
When analyzing NET stock, I focus on the weekly timeframe to understand the broader market structure rather than reacting to individual daily candles.
The current upward channel has been extended, and the latest leg higher is showing signs of weakness.
Previously, the stock displayed stronger directional momentum. More recently, advances have been followed by deeper retracements toward earlier price ranges.
This is an important distinction. A stock can continue making new highs while the underlying trend gradually loses strength.
For me, this is one of the reasons the current price structure deserves close attention.
Why I Believe the Correction Hasn’t Even Started Yet
My main thesis is that Cloudflare stock is transitioning from a trending market into a broad trading range.
We saw a similar type of development during 2021 and 2022. When an extended channel evolves into a trading range, price can revisit previous areas of consolidation rather than continue moving higher in a straight line.
If the same pattern develops in NET stock, the current decline could be an early stage of a much larger correction.
The important point is that a transition into a trading range can take time. There is no guarantee that price will move directly toward the lower end of the expected range.
However, the weakening momentum and repeated returns toward previous ranges support my bearish outlook.
How Low Could NET Stock Go?
Based on the current chart structure, I believe the low $200s represent the most likely area for a potential reversal.
This is the initial downside area I am targeting, although the actual path will depend on how price develops.
If Cloudflare continues to lose momentum, the stock could move toward this zone as the broader channel evolves into a trading range.
I will continue monitoring the structure and may take partial profits along the way. The objective is to manage the trade as price develops rather than assume that the entire move will unfold exactly as expected.
My Trading Plan for Cloudflare
My initial target is the low $200s, where I will evaluate whether the price action supports a reversal.
Depending on how the stock behaves, I may take partial profits before that level. A change in market structure would also require reassessing the trade.
The broader thesis remains bearish while the current structure supports a transition into a trading range.
Final Thoughts on Cloudflare Stock
Cloudflare remains an important stock to watch, but I believe the latest upward leg has weakened considerably.
The double top, extended weekly channel, and repeated retracements toward previous trading ranges all support the possibility of a deeper correction.
My focus is on whether NET continues transitioning from a strong trend into a broad trading range, with the low $200s representing my initial target area.
As always, price action will determine how the trade develops.
Do you think Cloudflare stock has further downside ahead, or will the bulls manage to regain control? Let me know your thoughts and questions in the comments.
This article reflects my personal market analysis and trading approach and is for informational and educational purposes only. It is not financial advice.
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