Investment Advice for Two Stock Picks in Technology Sector (PLCM, CHKP)


Does Zone Alarm ring a bell? It is a security product by Check Point Software Technologies Ltd (NASDAQ:CHKP) which has been used by almost all computer users. I remember myself installing Zone Alarm Firewall quite a few times in my 80386 and Pentium machines back in the 90’s. Perhaps that is reason behind the impressive uptrend of CHKP stock in 2000! Fast forward to 2011 CHKP is one of this week’s stock picks. Along with Polycom Inc (NASDAQ:PLCM) they are the stocks I picked due to the [intlink id=”2211″ type=”post”]bullish candlestick pattern[/intlink] in daily charts. More investment advice is based on the monthly stock charts though, since they can be extremely helpful pointing out crucial support and resistance levels of technical analysis!

Shares of CheckPoint Software Technologies have doubled their value in the last two years but they are still $70 short of their all-time high of $118 in 2000! CHKP stock was evidently one of the stocks that were benefited during the Information Technology Bubble when stock prices in technology sector skyrocketed due to speculation. Since then the stock market has balanced out and CHKP stock had been trading in the low 20’s for 6 years before entering a long-term uptrend. According to the monthly stock chart, the price tested the support level at $30 before heading north to $60, where a Double Top was formed at the weekly stock chart! MACD divergence can be spotted there as well, discrediting any investment advice for long trading! However trend-following stock trading has often turned out profitable for most position traders and the investment advice is based on the monthly stock chart, where the moving average might provide support and a boost for a new breakout. I’m looking to set a tight stop loss at 52 dollars per share when I buy CHKP stock at today’s open (probably close to 55 dollars per share). First profit target will obviously be set at $60 for a mediocre 5-3 reward-risk ratio but with very good potential in the long run.


Enough with internet security software. What about video conferencing? Polycom Inc (NASDAQ:PLCM) is well known for their video conference products such as the SoundStation and VoiceStation product line. I highly expect Polycom will also be quite heard of in the following months as PLCM stock will probably try to retest the resistance level at $34. Buying low and selling high has always been the best investment advice and that tip applies at this stock pick as well! PLCM stock has retraced back to a crucial support level ($15) with an exhaustion bar on 21st of October. The stock price has tried unsuccessfully to fill the gap of that day (open at $17 with previous close of $22!) but keeps being rejected at the support level of $15. The November’s inverted hammer candlestick is another bullish signal of technical analysis. Trading long at $17 with a stop loss right below the support level have good chances of showing a profit for a position trader. I wouldn’t necessarily expect PLCM stock to break above the resistance level at $34; I would be extremely satisfied if the stock was generous enough to move up to $22 where I would trade out 70% of my position.

Coming from the most recent excellent stock pick in energy sector of [intlink id=”2261″ type=”post”]Comstock Resources which gained 15% the next day[/intlink] I published the stock pick, these two stocks are added to my stock trading portfolio which already includes a couple more [intlink id=”2234″ type=”post”]stocks to watch from the technology sector[/intlink].

Disclaimer: I am not long PLCM or CHKP but I’m looking to buy their stocks today.