In Search of New Leaders in Tech

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This post is for education purposes only and should not be interpreted as a trade recommendation.

Man, TradeStation is seriously cool.

Earlier this week I created a special indicator to find sectors of the market holding up best since last month’s crash. (It highlighted banks.) Yesterday out of curiosity, I set the scanner loose on the entire S&P 500. The results can be summed up in three words: Tech, tech, and more tech.

Radar Screen w/S&P 500 stocks making new highs.

The RadarScreen® above ranks stocks by their distance above or below their previous 52-week high. (While there are many ways to generate such a list, this tool is especially powerful because it can show so many other things in so little space. More on that down the road.)

Five of the seven names were software makers. Autodesk (ADSK), whose programs are used in computerized design, led the charge after quarterly results blew past estimates. Even more important for investors was evidence that management is successfully migrating customers to a new cloud-based subscription model.

Many peers have already walked this path away from the old DVDs installers to web-powered products, including the second company on the list: Adobe Systems (ADBE). The iconic maker of graphics software has beaten estimates for at least the last three quarters and continues to levitate as investors await another dose of numbers next Thursday, March 15.

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Linux developer Red Hat (RHT) traded similarly. It also surprised to the upside in December. Like ADBE, it held its 50-day moving average for about a month before ripping to new highs. RHT’s earnings are slated for March 26. (CRM), a giant provider of enterprise software well known by most traders, found itself on the scan following strong numbers last week. (AMZN) also needs no introduction. Unless you’re trapped in an episode of “Three’s Company,” you know the story there.

How about F5 Networks (FFIV)? Pretty much a broken record on this one. Earnings beat in late January. Revenue beat. Guidance surprised to the upside. An extra point of interest is its exposure to cyber-security. Some other players in this niche, including FireEye (FEYE) and Palo Alto Networks (PANW), recently had good earnings as well.

Motorola Solutions (MSI) rounds out the list. Despite being known for police radios, even this firm’s executives have been talking up software as a driver of their growth.

One final note: While some companies on the list have broken out to new all-time highs, others are only now escaping from older ranges:

  • RHT: Just broke through an old high from December 1999.
  • FFIV: Just cleared a seven-year resistance zone between $146 and $150.
  • MSI: Just pushed above a peak at $105.20 from late 2006.

Interested in more? Check out our recent post “Turnarounds in tech?” for other names.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.