My favorite kind of stocks are those that advance and then base for an extended period of time before breaking out. The consolidation period rids the stock of weak holders, providing a much better foundation for a sustainable rally. Check Point Software Technologies (CHKP) fits the bill after reacting quite positively to its latest quarterly earnings report, beating Wall Street consensus estimates on both the top and bottom lines. Best of all, technical conditions are very strong as you can see below:
While the breakout is clear and momentum is strong, CHKP is very extended in the near-term and represents a much better reward to risk trade on the long side if prices pull back temporarily to test either the breakout level or its rising 20 week EMA. I'd keep an eye on this one and wait for some profit taking.
Happy trading!
Tom
