Should you buy or sell the DarkTrace share price dip?

The DarkTrace (LON: DARK) stock price relentless sell-off accelerated on Tuesday as investors remained wary about the company’s growth. The stock declined by more than 4% and ended the day at 540p. This means that it has crashed by more than 45% in the past few days weeks and is at the lowest level since July.

Why is DARK slumping?

DarkTrace is a relatively controversial technology company that provides cybersecurity company that is headquartered in London. One reason why it is controversial is that Mike Lynch is one of its biggest shareholders. 

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Lynch was the founder of Autonomy, a company he sold to HP in 2010. Shortly afterwards, HP made one of the biggest write-offs in the world. It blamed the company for misrepresenting its numbers. 

And this year, a court ruled that he could be extradited to the United States to face charges. Therefore, many investors have kept off because of these allegations.

DarkTrace is also controversial because of its products. Some cybersecurity experts believe that the company’s products are not as superior as it states. Indeed, this is the main reason that analysts at Peel Hunt noted when they downgraded their view a few weeks ago.

Meanwhile, the most recent results were relatively strong. The company said that its customers grew by more than 42% in the first fiscal quarter. Its annual run rate grew by 63.8% on a year-on-year basis. Most importantly, the company reiterated its outlook, with the CEO saying:

“We have continued our strong performance into the first quarter of FY 2022, growing our customer base, ARR and revenue. We remain focused on empowering organisations to interrupt cyber threats, before they experience a business disruption, using our leading Self-Learning AI technology.”

So, is DarkTrace a good investment? As for now, it is relatively difficult to recommend the stock because of the overall negative sentiment. The company is also facing significant competitive pressure from companies like SentinelOne, CrowdStrike, and Fortinet.

DarkTrace share price forecast

On the four-hour chart, the DarkTrace share price continued its bearish trend as sentiment waned. The stock has managed to move below the chin of the double-top pattern at 724p. It has also dropped below the 25-day and 50-day moving average. 

At the same time, the Relative Strength Index (RSI) has moved below the oversold level. The price has even moved below the 61.8% Fibonacci retracement level. Therefore, the pair will likely keep falling as bears target the key support at 450p.

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