For his second "Executive Decision" segment of Mad Money Monday evening, Jim Cramer spoke with Gil Shwed, founder and CEO of Check Point Software Technologies (CHKP) , the cybersecurity company with shares that trade for just 16 times earnings.
Shwed said the work-from-home trend opens up all new attack vectors for hackers. He said there are already bad actors taking advantage of people's desires for information on Covid-19 to install malware and ransomware on their computers and infect their company's networks.
Check Point recently raised capital to help them weather the Covid storm and Shwed said the company has $400 million on their balance sheet, and that's a great thing that gives them both flexibility and the ability to keep making smaller acquisitions as they become available.
Let's check out the charts and indicators of CHKP.
In this daily bar chart of CHKP, below, we can see that prices sold off sharply from February to early March. We can see a fast but successful retest of the early March low in late March before the rally gets going in earnest.
Prices are now retesting the December/January lows which could be considered resistance. CHKP has been pushing above the bottoming 200-day moving average line and the slope of the 50-day moving average line has been positive since early May. The trading volume was heavy in March suggesting that weak hands sold to stronger hands to create a bottom.
The On-Balance-Volume (OBV) line has moved up from its March low to tell us that buyers of CHKP have been more aggressive but the line has been moving sideways (like prices) the past six weeks or so. I would expect this temporary balance of buyers and sellers to resolve itself on the upside.
The Moving Average Convergence Divergence (MACD) oscillator is above the zero line and the two moving averages that make up this indicator are very narrow and poised, I believe, for a turn higher.
In this weekly bar chart of CHKP, below, we can see the past three years of activity. Prices have been in a long sideways trading range but this year prices briefly broke the early 2018 lows. Prices are now back up and testing the bottoming 40-week moving average line.
The weekly OBV line has been bottoming the past three to four months, and the MACD oscillator is quickly approaching the underside of the zero line.
In this daily Point and Figure chart of CHKP, below, we used a traditional even dollar scaling to create the chart. Here the software is projecting a potential upside price target of $132.
In this weekly Point and Figure chart of CHKP, below, we can see a potential upside price target in the $156 area.
Bottom line strategy: CHKP needs one or two strong up days with increased volume to "get it moving" higher. Traders could go long on strength above $111 and above $114. Risk a close below $105 for now.
