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Software breaking above 200-day moving average

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The GSTI Software Index (GSO.X) has been one of the stronger "computer tech" groups today and this afternoon's broader market strengthening now finds this index up 3.4% and vying with the CBOE Internet Index (INX.X) 132 +4% as a tech-related session leader.

The break above the 180 level for the GSO.X has this index back above its 200-day moving average, which is the first time this has taken place since January 30th.

GSTI Software Index Chart - Daily Interval

The GSTI Software Index (GSO.X) is breaking above its starting- to-round-out 200-day moving average. A break above retracement resistance near 184 would have this group of stocks rallying further to our upper-end of retracement at 200. With MACD trending higher, the group has some momentum. A good way to trade some stocks in this group is to ease in with 1/2 positions to begin with, then add on bullishness above the 184 level as your position moves with the sector and MACD gets above the zero level. If the software stock you're trading from the bull side does not mimic a bullish sector move, then that may be an alert that something is "wrong."

In today's market monitor, we also discussed the point/figure chart of the GSO.X and pointed out that the bearish resistance trend currently resides at the 182 level. I like the correlation of that trend with the 183 level from retracement to help guide a trader or establish some near-term tests of resistance. 1/2 position can be entered here to help limit risk and then add should resistance levels be cleared.

One stock I've mentioned in recent sessions near the $20-$21 level has been Rational Software (NASDAQ:RATL) $21.41 +9.5%. I still like the stock at current levels with a stop under $18.65 and targeting $25 near-term.

Jeff Bailey
Senior Market Technician
Option Investor

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