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.
We last commented on Cadence Design Systems Inc. (CDNS) on May 5th, when the price of the shares was at $308.08. The shares entered the Favored Zone on April 29th, when the price was $302.22. Today, we decided to provide an update to the name as the shares have continued to remain strong and have moved up the rankings in the SIA S&P 500 Index Report: rising 1 spot in the last day, 69 spots in the last week, 81 spots in the last month, and 38 spots in the last quarter. The shares briefly fell to the neutral zone but did not fall into the unfavored zone, instead recovering back to the favored zone earlier last week. Currently the shares reside in the #71 spot in the report with a closing price yesterday of $364.57. This represents an increase of 20.6% since its entry into the favored zone, and 18.3% since our last update on May 5th. This is another example of staying in investments in the green favored zone and reinforces SIA’s methodology of finding and staying with the winners which exhibit strong relative strength.
In looking at the attached candlestick chart of CDNS, we see the shares found a bottom in early April at the $230.00 level, and the bulls took charge as the uptrend materialized from that point on. Then, earlier this week, we see the shares gap up as CDNS reported their Q2 2025 Financial results which exceeded their Q2 guidance for Revenue & Non-GAAP EPS and raised their 2025 Revenue, Non-GAAP EPS and Cash Flow Outlook. In our May commentary we identified the $320 level as 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. That previous resistance was overcome in the week leading up to their earnings release. The shares are now in all-time high territory. Let’s examine the Point and Figure Chart to see what may lie ahead for the shares.
In the Point and Figure chart at a 2% scale, we see the shares hit the $320 ceiling a fifth time in May. At that time the shares closed above the $326.80 level, signifying a major move as the bulls finally took charge and moved the shares to new discovery territory.
In our May update we identified $360 as potential resistance - if the shares could break above the $320.00 ceiling. The shares have now surpassed this resistance point as well. In looking at the chart, next resistance based on horizontal and vertical counts will now be at $414.46 and $457.60. To the downside, support is at its 3-box reversal of $340.00 and, below that, $320.39, its prior resistance point. The shares currently exhibit a bullish spread triple 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.
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