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Software breaking to 52-week lows

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The GSTI Software Index (GSO.X) broke to a 52-week low in the past hour and this will most likely have some bears showing up at the food buffet, looking for weaker stocks in the sector that may have seen a short-term rally stall out at a level of technical resistance.

Shares of sector bellwether Microsoft (MSFT) $53.86 -3.09% are exacerbating the declines as the nine states suing Microsoft (MSFT) try to show that the company's chairman Bill Gates is too extreme in his interpretation of proposed antitrust penalties against his company.

Kronos Inc. Chart - Daily Interval

Anytime a sector breaks to new highs or new lows, it can have market makers in other stocks matching the action with their own trading. With the GSTI Software Index (GSO.X), I'm looking for some stocks that might benefit a bearish trader to the downside. I like the potential bearish trade setup in shares of Kronos (NASDAQ:KRON) $40.03 -1.42% on a break below yesterday's low of $39.55, which would have the stock breaking back below the mid- point of its regression channel. The trader understands that today's "bearish action" in the GSO.X is most likely due to Bill Gates' testimony regarding the antitrust penalties. Therefore, I'm thinking it best to try and identify "action points" that may trigger some near-term selling in weaker stocks in the group.

NIVIDIA is tough trade here

NVIDIA (NASDAQ:NVDA) $36.24 -2.3% is one of those bearish looking technology stocks that looks like its a "bears breath" away from getting flushed, but for the trader, its a tough action point at current levels. Based on conventional retracement the stock is just about smack-dab between 61.8% and 80.9% retracement, but finding resistance at the mid-point of regression. A trader's target near-term would be the $33.02 level at 80.9% regression.

We've talked bearish about NVDA from the $60, when at that time the bearish vertical count was $42. The stock has exceeded that level and most likely has some institutional bulls a bit nervous as it becomes even tougher to ascertain downside risk. When this happens, some bears are heard to be murmuring "dinner is served!"

NVIDIA Corporation Chart - Daily Interval

I also discussed NVIDIA (NVDA) in today's market monitor at 01:50:33 and can use the above chart and comments to supplement those observations and thought. Good looking short/put here, but would only suggest 1/2 positions to protect against any short- covering rally to $42.

Jeff Bailey
Senior Market Technician
Option Investor

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