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Cautious investors know how to set their buy-up price targets, and then just wait patiently. This strategy could prove to be successful with IronNet (NYSE:IRNT), especially since IRNT stock recently surged hundreds of percentage points.

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It's amazing to consider that just a couple of months ago, IronNet wasn't a hot topic at all. Now, suddenly the trading community is buzzing about this company.

Is it possible that there's more to the story than IRNT's epic short squeeze? As we'll see, IronNet is actually an intriguing business in a time when cybersecurity is vitally important.

So, whether you're a short-term trader or a long-term investor, there's something here that should pique your interest. Let's start off, then, with a quick bit of technical analysis and the history of this fast-moving stock.

A Closer Look at IRNT Stock

Going back to the beginning, IRNT stock debuted on the New York Stock Exchange on Aug. 27 after IronNet completed a business combination with LGL Systems Acquisition Corp.

This transaction resulted in IronNet receiving gross proceeds of approximately $136.7 million.

After this event took place, the share price took off like a rocket. I've seen special purpose acquisition companies (SPAC) stocks move fast, but this was a sight to behold.

Maybe it was an instance of SPAC mania. Maybe it was a Reddit-fueled short squeeze. Maybe it was both.

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Whatever the cause may have been, IRNT stock catapulted from $10 in late August to $47.50 on Sept. 16.

Always remember, price chasers often get punished. If you need an example of this, just look at what happened with IronNet.

I take no pleasure in reporting this, but the shareholders got shellacked after the astounding run-up in IRNT stock. It trades today at a little more than $25.

When a stock has gone up too far, too fast and is falling, a sensible strategy is to select a buy target and wait until the price gets there (if it does). For this particular stock, there appears to be some support at the $17 level from early September, so that could be as good a buy-up price as any.

The Best Defense

The press release associated with the SPAC transaction states that IronNet addresses a market that's expected to grow from $25 billion to $40 billion over the next three years.

That's a decent-sized market, indeed. On the other hand, IronNet certainly isn't the only cybersecurity business out there.

What differentiates IronNet is that the company uses what's known as the Collective Defense Platform. The company describes the Collective Defense concept as "the ability for organizations… to share threat intelligence securely and in real time, providing all members an early warning system about potential incoming attacks."

Collective Defense is designed to be predictive and artificial-intelligence-driven.

If its adoption grows in the broader cybersecurity market, IronNet's platform could represent a quantum leap forward in real-time data-threat detection.

A Timely Investment

There are many themes to characterize 2021, and cybersecurity is definitely one of them. As you may recall, the Colonial Pipeline was hit with a ransomware attack in May of this year.

Not long afterward, in early June, F.B.I. director Christopher A. Wray compared the ransomware threat to the challenge of global terrorism in the days after the Sept. 11, 2001 attack.

Clearly, cybersecurity is serious business and IronNet's Collective Defense Platform is an invention that could benefit many businesses and organizations.

The company's clients seem to recognize this. During 2021's second quarter, IronNet's subscription revenues increased to $5.8 million from $5.3 million in the same quarter of 2020. In total, the company took in $6.1 million in quarterly revenues (not too bad), and it will be fascinating to watch IronNet grow along with the cybersecurity market in general.

The Bottom Line

The lesson here is that short squeezes can be powerful, but chasing stock-price run-ups can be hazardous.

Yet, there's another lesson to be learned: cybersecurity is a rapidly growing and evolving industry.

IronNet certainly has a prominent place within that market. As the Collective Defense Platform gains traction and adoption, prepare for higher prices in IRNT stock, even without a short squeeze.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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