CHKP and SYMC are surrounded by pessimism despite strong technical performances
Earlier we took a looking at
bank stocks, as the sector should be in focus in the upcoming weeks. Another sector that's been receiving extra attention recently is cybersecurity -- which falls under our "software" umbrella -- with
Equifax CEO Richard Smith testifying before Congress yesterday. The software group as a whole has been strong in 2017, with these stocks sporting an average year-to-date gain of 33%. Two such names that have outperformed over the past year are
Check Point Software Technologies Ltd. (NASDAQ:CHKP) and
Symantec Corporation (NASDAQ:SYMC).
But before taking a closer look at CHKP and SYMC, it's worth touching upon an interesting trend among the cybersecurity stocks we cover. That is, short interest has declined over the past year on all eight names we track, including a 19% drop for Check Point Software and an 8% drop for Symantec, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. When looking at the charts, it's hard to blame any bear for throwing in the towel.
Specifically, CHKP has been on fire in recent years, climbing 47% in the past year alone. Back on Oct. 3, the shares touched a nearly 17-year high of $116.68, while narrowly outperforming the broader S&P 500 Index (SPX) during the past two months to trade at $115.84. Despite all this, there's plenty of pessimism surrounding the security.
In the options pits, put buying has more than doubled call buying over the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- albeit amid low absolute volumes. CHKP's 10-day put/call volume ratio of 2.31 ranks in the 85th annual percentile, hinting at a stronger-than-usual bearish bias. An unwinding of these positions could help push the equity higher.
Meanwhile, analysts are also skeptical. Half the brokerage firms tracking Check Point Software Technologies rate it just a "hold," and its average 12-month price target of $109.66 is below current levels. Upgrades and/or price-target hikes seem like a possibility for this stock.
As for Symantec, the shares are up 32.5% during the past 12 month, and touched an all-time high of $34.20 on Sept. 20. At last check, SYMC stock was up 1.2% at $33.65, as they enjoy strong support from their 20-day moving average.
Like its sector peer, the security could benefit from bullish analyst attention. In fact, just seven of 20 brokerage firms recommend buying the equity, and it just overtook its average 12-month price target of $33.28.
Either way, it's a good time to target short-term Symantec options. For example, the stock has a Schaeffer's Volatility Index (SVI) 27%, which ranks in the bottom one-third of readings from the past year. In other words, lower-than-normal volatility expectations are being priced in to near-term contracts.