close icon

CHKP Stock Can Ruin a Buy-the-Dip Strategy

Check Point Software Technologies is among the global leaders in the field of cyber security. The company was founded in 1993 and is headquartered in Tel Aviv, Israel, but CHKP stock trades on the NASDAQ since 1996.

CHKP went though the dot-com bubble and burst in 1999-2002. Its stock price didn’t fully recover from it before the year 2017. Last week, it closed at $113.32 a share, meaning buy-and hold investors from 20 year ago are still at the break even point. On the other hand, those who were buying the dips in CHKP stock since 2002 have been rewarded very generously.

CHKP stock to begin a major Elliott Wave correction

As the chart above depicts, the buy-the-dip strategy led to profits every single time since 2002. Usually, when something so simple has been working so well for so long, investors start believing it will never stop working.

Unfortunately, no trend lasts forever and therefore no strategy works forever. Market conditions eventually change, bringing losses to the careless and unprepared. Check Point is a great company, but in our opinion the current pullback from $132.75 is a not a buying opportunity. At least not yet.

No More Easy Money to Make in CHKP Stock

The reason for our pessimism is not buried in the company’s fundamentals, but in the structure of the bull market since 2002. It can be seen as a textbook five-wave impulse, labeled (I)-(II)-(III)-(IV)-(V). The sub-waves of waves (III) and (V) are clearly visible, as well.

This pattern indicates CHKP stock is in a long-term uptrend. The problem, according to the Elliott Wave theory, is that a three-wave correction in the opposite direction should follow first.

The corrective phase of the cycle usually erases all of the fifth wave’s progress. For CHKP, this translates into a decline to the support area of wave (IV) near $65 – $70 a share. There is also a bearish RSI divergence between the last three highs, which reinforces the negative outlook.

If this analysis is correct, the current dip is going to be a lot bigger than the last several ones. A much better buying opportunity should occur once CHKP stock enters the support area near $70.

Did you like this analysis? Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!

Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Ulta Beauty No Longer a Wall Street Darling

Ulta Beauty ‘s phenomenal uptrend started from $4.11 in March 2009 and did not stop until $368.83 in mid-July 2019. The company’s market value grew by almost 8900% in just ten years, easily earning Ulta a Wall Street darling status. Unfortunately, Wall Street likes fast-growers only as long as they keep growing. Ulta Beauty reduced…

Read More »

Is Oil States Stock Finally Ready for a Rebound?

The last time we wrote about this relatively unknown oil services provider was over two years ago, in August 2017. Oil States stock was trading near $21.50 a share following a decline from almost $42. Yet, with the help of the Elliott Wave principle, we concluded the price can get cut in half again “to…

Read More »

Can this Elliott Wave Setup Cut Seek Stock in Half?

Seek Limited operates online platforms where jobseekers can find employment opportunities. The company is based in Australia, but also conducts business in China, India, New Zealand and Brazil, among others. Seek stock is traded on the Australian Stock Exchange under the symbol SEK. Seek stock lost over 78% during the 2007-2009 global crash, but has…

Read More »

Realty Income Pattern Sets the Stage for a 40% Drop

Realty Income Corp. is a REIT dedicated to delivering dependable monthly dividends to investors. The company owns over 5900 real estate properties and has a market value of roughly $23.5 billion. Adjusted for splits, it went public in 1994 at $8 and reached an all-time high of $76.73 two days ago. Not counting the dividends,…

Read More »

Walgreens Stock Can Add Roughly 30%

On December 4th, 2018, Walgreens stock was trading north of $86.30 a share. Yesterday, it closed at $51.43 for a total loss of 40.4% in nine months. Nine months in which the general stock market has been rallying. Walgreens Boots Alliance is a pharmacy retailer with over 18 500 stores in 11 countries. Walgreens is…

Read More »

Rapid7 Stock is Prone to Decline… Maybe Rapidly

Rapid7 stock appreciated by over 630% between February 2016 and July 2019. The price climbed from $9.05 to $66.01 in less than four years on the back of strong secular growth in the cyber security industry. However, Rapid7 hasn’t been able to capitalize on the vast opportunities in the space. The company posted annual losses…

Read More »

Can Facebook ‘s Antitrust Concerns Fulfill this Setup?

This article was originally published on June 13th, 2019.  It was updated on August 7th, 2019. Facebook ‘s privacy policies are under the microscope once again. Personal e-mails uncovered during an FTC investigation reveal Mark Zuckerberg knew of the company’s problematic privacy practices. Escalating antitrust concerns are not helping the bulls’ cause, either. Facebook stock still hasn’t been able to fully…

Read More »

More analyses