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:

Alphabet Stock To $1700 and… Below?

Similarly to the market at large, Alphabet stock felt the tremors caused by the coronavirus panic. The Google parent’s share price fell from $1531 to $1009 between February 19th and March 23rd. One of the biggest and strongest companies in the world lost 34% of its value in a little over a month. However, thanks…

Read More »

Sidestepping the 55% Crash in Steel Dynamics Stock

It’s been a little over four months since we wrote about Steel Dynamics. On January 16th, the stock was hovering around $33 a share. The price was down 37% from its May 2018 peak at $52.10. Yet, despite the reduced price, we thought investors would be better off avoiding the name. Our bearish opinion was…

Read More »

Omnicom Bears Face Strong Fibonacci Support

Yesterday, we talked about Interpublic and how Elliott Wave analysis warned us about its stock’s collapse two years in advance. Today, we are going to focus on Omnicom, which looked vulnerable to us in March 2018, as well. Omnicom rose from $20.09 to $89.66 between March 2009 and December 2016. The stock took full advantage…

Read More »

Two Years Ahead of Interpublic ‘s 55% Collapse

Interpublic and Omnicom used to be the giants of the advertising world. In the old economy, their competitive advantages seemed indestructible. Then, the Internet revolution came along and Facebook and Google created a lot of problems. However, their stocks were still making new highs until two years ago. Interpublic stock, for instance, was hovering around…

Read More »

Nestle Set to Complete a Pattern it Started in 2003

Nestle S.A. is one of the largest companies in the world and the biggest food and drink producer by revenue. The company is headquartered in Switzerland and went public in 2001. The stock’s all-time low was reached in March 2003, when it fell to CHF 23.32 a share. Seventeen years later now, Nestle stock is…

Read More »

Bulls to Lift Mondi Stock to New Highs

We first wrote about Mondi plc, the paper and packaging company, almost a year ago. On May 5th, 2019, the stock was hovering above 1700 pence per share. Despite being down 25% from its all-time high already, we thought it was too early for investors to buy the dip. Our pessimism was based not on…

Read More »

Rapid7 ‘s Rapid Decline Plants the Seeds of a Rally

Eight months ago we made a case that Rapid7 investors should not expect the future to resemble the past. The stock was up 492% since February 2016 and was hovering above $53.50 in August, 2019. Without a doubt, the cyber-security industry was and still is enjoying a strong tailwind. However, Rapid7’s daily chart revealed a…

Read More »

More analyses