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Software Rolling Over\?

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Technology stocks continue to attract the most selling today, with several software names topping the Nasdaq-100 decliners list.

GSTI Software Index Daily Chart

The Software Index (GSO.X) started to spell trouble on Monday when it failed to clear the May downtrend and 6/12 high, forming a bearish shooting star in the process. The next day GSO.X lost the 50-day moving average, and the stochastic started to roll over. Now it looks tomorrow could see a test of 210, or possibly the 202 to 200 area if the sell off accelerates.

PeopleSoft Daily Chart

PeoplesSoft (NASD:PSFT) has set up a pattern of making a new relative high, and then selling off. Friday set a new high, and PSFT has sold off $6 over the past three days. The most disturbing part of this pattern is the bearish divergence that keeps showing up as each new high is set. Usually this is a sign of weakness, so it will be interesting to see if PSFT holds at $42, and above the 50-dma. If not, I could see the stock going down to support at $38 and the 200-dma.

Jeffrey Canavan
Assistant Analyst
www.premierinvestor.net

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