SIA Charts’ relative strength rankings help investors identify opportunities in stocks which are outperforming their peers or index benchmarks on a relative basis. Outperformance often reflects improving investor expectations for strong company growth or sector growth. The rankings not only help investors to identify which stocks in a universe are outperforming and underperforming against their peers, but also when relative performance trends are changing.
The power of the SIA platform is its ability to identify these changing money flow trends as the whole Computer Software sector has risen to a favored rating in SIA’s Market sector report at the 6th spot out of 31 sectors.
In recent days, we looked at two computer software stocks, Palantir Technologies and ServiceNow in our Daily Commentaries as stocks which started forming positive moves. Against this sector backdrop, today we look at another example in the SIA Computer Software sector.
Cadence Design Systems Inc. (CDNS) recently entered the Favored Zone of the SIA S&P 500 Index report on April 29th at a price of $302.22. As of Friday’s Close, the shares are slowly rising to $308.08. Currently the shares reside in the 100th spot out of 505 positions in the report, up 51 spots in the last week and 280 spots in the last month.
In looking at the attached candlestick chart of CDNS, we see the shares trended in a sideways consolidation pattern from late 2021 to early 2023, hovering between the $140 to $190 range. Then in February of 2023, the shares broke out to the upside before running out of steam at the $320 level in March of 2024. This $320 level proves to be massive resistance as a quadruple top pattern appeared where the shares hit its head four times in March 2024, June 2024, December 2024, and January of 2025 before the shares broke down and a downtrend materialized. The shares appear to have found support at the $230 level which is slightly below the $245 prior support level the shares found in August of last summer. A strong rally has formed over the past month as the shares are currently moving towards the important $320 level which will once again prove to be strong resistance. It will be interesting to see if, on the fourth attempt, the shares can break above this important level.
In the Point and Figure chart at a 2% scale, we see in the most recent movement of the shares in 2025, a column of O’s form in April which ultimately ended one box below the prior column of O’s in the March column, indicating a potential bear trap. Currently, the investment is reversed trend with a new column of X’s forming and is poised to try and march back to the heavy resistance area of $320 which we saw the shares hit a ceiling in March, June, December of 2024 and January of this year. If the shares can finally break above this resistance level, next resistance will be at $360.82 based on a measured move. To the downside, support is at its 3-Box reversal of $284.50, and below that, $242.82. The shares currently exhibit a bullish Double Top pattern and with an SMAX score of 10 out of 10, the shares are exhibiting strong near-term strength against the asset classes.
Cadence Design Systems is a provider of electronic design automation software, intellectual property, and system design and analysis products. EDA software automates the chip design process, enhancing design accuracy, productivity, and complexity in a full-flow end-to-end solution. Cadence offers a portfolio of design IP, as well as system design and analysis products, which enable system-level analysis and verification solutions. Cadence's comprehensive portfolio is benefiting from a mutual convergence of semiconductor companies moving up-stack toward systems-like companies, and systems companies moving down-stack toward in-house chip design. The resulting expansion in EDA customers, alongside secular digitalization of various end markets, benefits EDA vendors like Cadence.
Disclaimer: SIACharts Inc. specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment whatsoever. This information has been prepared without regard to any particular investors investment objectives, financial situation, and needs. None of the information contained in this document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. As such, advisors and their clients should not act on any recommendation (express or implied) or information in this report without obtaining specific advice in relation to their accounts and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. SIACharts Inc. nor its third party content providers make any representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein and shall not be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon. Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.
