Cybersecurity Stocks in Focus After Massive Attack (FEYE, CHKP)

A massive weekend cyber-attack has governments and corporations scrambling to close multiple vulnerabilities while delivering a wake-up call that highlights the failure of these institutions to address long-term security solutions. Presidents, ministers, and CEOs have all been negligent in recent years, throwing money at pet programs while ignoring hacking threats that can wipe billions off their balance sheets with a click of a mouse. 

Cybersecurity stocks should benefit greatly from the latest round of attacks, with world leaders under pressure to throw money at the crisis to avoid unwelcome media attention or a full-scale assault, like the well-publicized Target, Corp. (TGT) and Yahoo, Inc. (YHOO) hacks. Three security software companies stand out in this regard, with bullish price patterns that predict much higher prices in coming months.

Check Point Software Technologies, Ltd. (CHKP) hit an all-time high at $118.65 in the second-half of 2000 and plunged with tech stocks during the Dot.com bear market. It broke out above a 7-year resistance at $27.50 in 2009 and entered an uptrend that still hasn’t reached the prior high. Even so, steady upside since August 2016 has built a supply of happy shareholders that should eventually support that bullish event.

The stock lifted within 8-points of resistance on Monday morning, with American traders getting their first bite at the apple after the weekend hack. Channeled price action since January lowers the risk of buying too high because the news triggered an upside breakout, establishing new support at Friday’s close near $107. This allows a tight stop loss under that level or below the channel bottom at $103 to stay out of the way if predatory algorithms shake out this week’s reactive buyers.  

Symantec, Corp. (SYMC) rallied above 8-year resistance at $6.50 in 2000 and completed a decade-long cup and handle pattern two years later, ahead of a breakout that posted an all-time high at $34.05 in 2005. It has been all downhill since that time, with a downtrend that found support at $10 in 2008, followed by weak performance throughout this bull market cycle. Even so, an uptick that started in 2016 has made substantial progress, lifting the stock within a point of last decade’s high.

It gapped down last week after lowering guidance and filled the gap on Monday morning, in a bullish reaction to the news. A rally above last week’s high will complete the turnaround while initiating the long awaited test at the 2005 high. That type of testing process would normally last for months, but recent events may act as a quickening agent, generating a rapid breakout to an all-time high.  

Lowly FireEye, Inc. (FEYE) has traveled a darker path than its cyber security rivals, stuck in a major downtrend that’s now entered its third year. However, recent events demand a second look at the stock because it jumped more than 50% since hitting an all-time low at 10.10 on March 9 while the On Balance Volume (OBV) pattern is signaling a possible long-term bottom,

The decline initially ended at $11.35 in February 2016, but the stock broke that support level 3-months ago, triggered a selling climax and March bounce that set off a 2B buy signal, denoting the failure of bears to hold a new resistance level. The stock gapped up on May 3, closing above the 200-day EMA for the first time since August 2015 and could now add substantially to those gains, with a logical upside target in the mid-20s.

Cybersecurity software stocks are trading sharply higher this week in reaction to a hacking attack that affected at least 200,000 computers in more than 150 countries. This dramatic wake-up call should translate into much higher technology budgets and increased business for these top security companies.

<Disclosure: the author held no positions in aforementioned stocks at the time of publication.