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Tickers in this Article: AAPL, GOOG, VMW, MENT, NATI, ANSS
When technology stocks are mentioned, most people think about stocks like Apple (Nasdaq:AAPL) or Google (Nasdaq:GOOG). However, the software and services sector is one subset of the technology group that traders should familiarize themselves with. This group has been performing well, and a closer look into technical and system software companies reveals that some stocks are approaching key levels. Traders should take note when a specific sector moves in unison like this, as it could signal institutional activity.
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Vmware (NYSE:VMW) is a leader in this space and has been consolidating a prior trend move higher for a few months. It has tested the $75 level on a few occasions and has established this area as support. It recently managed to climb back above its 50-day moving average and is testing a declining trendline that has marked some recent pivot highs. Traders should monitor the $85 level as a move above this area would set a higher pivot high and imply a test of the September highs near $90.


Source: StockCharts.com


Mentor Graphics Corporation (Nasdaq:MENT ) is another stock in this sector that is near some key levels. MENT cleared a base in September before settling into a tight consolidation between $10.50 and $11. MENT was able to clear this level, but has settled into yet another 50-cent consolidation. Traders should monitor the $11 and $11.50 levels for a break in either direction. (For more, see The Anatomy Of Trading Breakouts.)


Source: StockCharts.com


ANSYS (Nasdaq:ANSS ) is also working on a tight consolidation after a recent breakout. ANSS was trading in a very wide and choppy base over the past several months. It had a surge to the top of the base in October, and after a tight consolidation managed to break out from its base. It is now flagging above this base as it consolidates the breakout. Traders should monitor the area near $46.50-$47 for support, and just above $49 as a possible breakout level.


Source: StockCharts.com


National Instruments Corporation (Nasdaq:NATI ) is a software stock that is also above a prior base. NATI cleared a wide base in October on an increase in in volume. NATI has managed to hold above the breakout area and still has an unfilled gap in this area. This is bullish as it shows market participants are willing to buy despite the higher prices. NATI is currently testing its 50-day moving average and if it fails to hold, traders should then look to the $33 area for possible support. On the upside, the first level to watch would be near $35.50. Clearing this level would pave the way for a retest of the $37 level. (For more, see Finding Undiscovered Stocks.)


Source: StockCharts.com


Technology stocks have been leading this market for most of the year and the software sector in particular remains poised for more upside. Despite the recent pullback in the markets, the stocks above have managed to remain above their prior breakouts and continue to consolidate in a tight range. If the markets show some strength to close out the year, this group of stocks could make a push higher. (For more, see Stock-Picking Strategies: Technical Analysis.)

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At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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