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Software stocks lead tech's gains

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The GSTI Software Index (GSO.X) is up better than 3% this morning and is helping bolster the NASDAQ Composite (COMPX). Whenever one of the weaker groups shows gains, our first thought is that bearish traders are locking in gains. From our fitted retracement bracket, it will most likely take a move above the 128 level in the GSO.X to create a meaningful move higher. Any bullish trades in software stocks will be wanting to monitor the recent 52-week low at 112.18. A break below that level would be further sign of sector weakness and could adversely affect the upside performance of the most bullish looking software stocks.

GSTI Software Index - last nine months

The GSTI Software Index (GSO.X) is showing a nice gain today, but there's a lot of work to be done for this group to be getting bullish. Today's gains are most likely coming from bears looking to lock in some profits from short/put positions established in the $170 to $155 range. It will most likely take some new bulls coming into the group above the 128 level to see further advances.

Microsoft (NASDAQ:MSFT) remains the largest weighted stock in the sector as it represents 9.13% of the index weighting. Oracle (NASDAQ:ORCL) weighs in at #2 with an 8.56% weighting and Veritas Software (NASDAQ:VRTS) is #3 with a 7.88% weighting. Other notables include Computer Associates (NYSE:CA), BEA Systems (NASDAQ:BEAS), Siebel Systems (NASDAQ:SEBL) and PeopleSoft (NASDAQ:PSFT).

Subscribers can get a complete list of GSTI Software Index components by visiting www.cboe.com.

Jeff Bailey
Senior Market Technician

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