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Checkpoint Software Tech. - CHKP - close: 72.70
CHKP has been on our LEAPS Trader watch list for over a month. After bouncing near support the rebound in CHKP accelerated sharply.
This stock soared $6.43 or +9.7% to end last week at a multi-year closing higher. Our plan was to buy calls if shares closed above $72.50. Friday's close at $72.70 meets that requirement. Officially our trade opens on Monday morning but I am suggesting investors may want to wait for a pullback. After a 10% gain in five days you might be better off buying a dip. The $70.00-70.50 area should be short-term support.
CHKP's earnings report last week helped fuel the rally. Wall Street was expecting a profit of $0.91 a share on revenues of $367 million. The company reported a profit of 93 cents with revenues up +7.6% to $370.4 million. Multiple analysts raised their price target on CHKP following the earnings report.
NOTE: Keep in mind the 2015 January calls only have about three months left. You may want to buy the 2016s.
Earlier Comments: September 14, 2014:
CHKP is another technology stock and it is similar to AKAM in that both have beaten earnings estimates every quarter this year and both are trading near 14-year highs. While AKAM facilitates Internet traffic, CHKP seeks to guard its clients against Internet hazards.
The company describes itself as, "the worldwide leader in securing the Internet, provides customers with uncompromised protection against all types of threats, reduces security complexity and lowers total cost of ownership. Check Point first pioneered the industry with FireWall-1 and its patented stateful inspection technology."
"Today, Check Point continues to develop new innovations based on the Software Blade Architecture, providing customers with flexible and simple solutions that can be fully customized to meet the exact security needs of any organization. Check Point is the only vendor to go beyond technology and define security as a business process. Check Point 3D Security uniquely combines policy, people and enforcement for greater protection of information assets and helps organizations implement a blueprint for security that aligns with business needs. Customers include tens of thousands of organizations of all sizes, including all Fortune and Global 100 companies. Check Point's award-winning ZoneAlarm solutions protect millions of consumers from hackers, spyware and identity theft."
It feels like a week doesn't go by that we don't hear about another major hacking scandal in the business world. It's not going away and corporations have to constantly update their cyber defense. CHKP has been working cyber security since 1993.
Shares of CHKP spent much of this year consolidating gains from 2013. However, the last week of August produced a crucial breakout past resistance near $70.00. Tonight I am suggesting a trigger to buy calls if CHKP can close above $72.50. We'll start with a stop at $69.45. The point & figure chart is bullish and currently forecasting an $89.00 target. We'll start with a long-term target in the $95-100 zone (our target to exit the 2015 calls will be lower).
Breakout trigger: Wait for a close above $72.50
Then buy calls the next morning with a stop at $69.45
BUY the 2015 Jan $75 call (CHKP150117C75) current ask $1.40
- or -
BUY the 2016 Jan $80 call (CHKP160115c80) current ask $4.80
10/27/14 trade begins.
10/24/14 CHKP meets our entry point requirement with a close at $72.70. Trigger was a close above $72.50
10/05/14 Friday's move might signal the end of the pullback.
Option Format: symbol-year-month-day-call-strike
Current Target: CHKP @ 95.00-100.00 zone
Current Stop loss: 69.45
Play Entered on: 10/27/14
Originally listed on the Watch List: 09/14/14