Cadence Design, Striding Higher

Georgian soldiers take part in a ceremony ahead of the joint Georgian-U.S. military training exercise "Agile Spirit 2013" at the Vaziani military base outside Tbilisi on Monday, March 18, 2013. A group of 350 U.S. Marine Corps and the 23rd Battalion of the II Infantry Brigade will take part in the joint training exercise until April 29, according to the official website of the Georgian Defence Ministry.(AP Photo/Shakh Aivazov)

The stock market has been nothing but fickle over the last several months. Without a discernible long term trend higher or lower, it leaves the field wide open for everyone to make wild predictions of what will happen. One thing to consider though is that the market is in a long term trend……. sideways.

Yes stocks can move in 3 directions not 2, up, down or sideways. And those directions can change over time. So when there is a discernible trend that can allow you to profit it is important to take notice. One such trend may be emerging in Cadence Design ($CDNS). This stock has been on our radar in the recent past as it pushed higher from the January low. But then it stalled at the end of March.

cdns

It has shifted into one of those sideways trends. And it stayed there for 6 weeks until it took a stride to the upside Monday. There were signs that this might be coming. The price had been moving slowly higher after touching the 50 day SMA two weeks ago. The RSI had turned back higher. The MACD even crossed positive Friday. But all of these signs need confirmation in a price move. That came Monday.

Breaking the channel to the upside changes the trend. One measure of how far it might go is found by looking at the run from the base at 19 to the consolidation at 23.50 and adding that to the upside. This gives a target of 28. It may or may not get there, but this does suggest that the risk reward of entering a trade now against a stop at the channel is quite good.

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