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:

GTX Stock May Recover, but Remains Under Pressure

With a market cap of just over $1B, Garrett Motion Inc. is still considered a small company. Founded less than two years ago in Rolle, Switzerland, the company provides electric-boosting technologies for light and commercial vehicle manufacturers. In September 2018, GTX stock started trading on the NYSE. It was hovering in the vicinity of $20…

Read More »

Lockheed Setting the Stage for an Unpleasant Surprise

Lockheed Martin has been one of the best companies to own during the last ten years. The Great Recession dragged the stock down to $57.41. Once again, the point of maximum pessimism turned out to be the best time to buy. Two days ago, LMT closed at a new all-time high of $370.38 a share.…

Read More »

CVI Stock Keeps the Elliott Wave Rally Alive

The first time we wrote about CVR Energy was in September 2016. CVI stock was hovering below $15 a share at the time, following a crash from as high as $72 in 2013. Despite the terrible three years the bulls had to suffer through, our Elliott Wave analysis of CVI stock ‘s weekly chart convinced…

Read More »

WD Stock Gets Vulnerable Near All-Time Highs

Walker & Dunlop Inc. provides financing services to owners of commercial real estate from its 29 offices in the U.S. Valued at just $1.6 billion, the company is a hardly a mainstream name. WD stock has an average daily volume of less than 170 thousand shares. Apparently that is still enough for Elliott Wave patterns…

Read More »

Can Facebook ‘s Privacy Concerns Fulfill this Setup?

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. Facebook stock still hasn’t been able to fully recover from the crash in the second half of 2018, which dragged the price from $218.62 down to $123.02. How…

Read More »

JPMorgan: Risk is High After 10 Years of Bull Market

Between March 2000 and March 2009, JPMorgan Chase & Co. investors saw their holdings’ value decline by almost 78% as the stock fell from over $67 to less than $15 a share. The next ten years, on the other hand, have been a wonder to behold. JPM stock rose like a phoenix from its ashes,…

Read More »

SERV Stock Sets the Stage for a 40% Tumble

ServiceMaster Global Holdings, founded in 1929, is a cleaning and pest control company headquartered in Memphis, Tennessee. The company went public in 2014 and has delivered very generous returns for its shareholders since. SERV stock took off from $11.54 in August 2014 and climbed to as high as $56.50 earlier this month. A 390% total…

Read More »

More analyses