Synopsys Pushing Higher

12/29/04 08:00:45 AM

by Gary Grosschadl

Synopsys, a world leader in semiconductor design software, technically looks strong for a continued bounce.

Security: SNPS
Position: Buy

Synopsys, Inc., was punished hard this year, falling from $37 to $15. Since finding support at $15, the stock is thrusting past its 20-week exponential moving average (EMA) and now deserves a closer look. The move above this moving average should add some bullish fire to this drive.

An Andrews pitchfork is drawn using three turning points in order to see where this move may carry. Pitchfork theory holds that 80% of the time, a valid pitchfork will eventually move to its median line. This presents an ambitious target of $30-plus. Since this is a rather large pitchfork, a smaller move to a midpoint line would make for a more prudent target in view of two other factors. This area also represents a previous gap and the current 50-period EMA of 22.21. Previous gaps often become significant points of future support/resistance. This target area of $22 to $24 makes a good trading target for those reasons.

Figure 1: Synopsys. Weekly chart shows two targets using pitchfork analysis. Since finding support at $15, the stock is thrusting past its 20-week EMA and now deserves a closer look.

Graphic provided by: StockCharts.com.

Several indicators also support a bullish view. The directional movement indicator (at the top of Figure 1) shows a trend change in the making as the average directional movement index (ADX) is coming off a peak, while the directional index (DI) components converge to a possible cross. When +DI rises above -DI, the bulls are firmly back in charge, and then a rising ADX (once it reverses) adds bullish trend strength to the move, should this transpire.

The lower indicators also show bullish developments. The moving average convergence/divergence (MACD) has made a bullish crossover from low levels, while the relative strength index (RSI) promises to rise past the key area of 50. The stochastic indicator has recently done a "high turn," which often leads to a continued bullish push north.

Although a move to the gap area is anticipated, a surprise move that violates the lowest pitchfork line (lower median line) would be very bearish and invalidate the bullish pitchfork.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.


Website:	www.whatsonsale.ca/financial.html
E-mail address:	gwg7@sympatico.ca

Click here for more information about our publications!

Comments

Date:�12/29/04Rank:�5Comment:�

PRINT THIS ARTICLE

Request Information From Our Sponsors

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

Comments or Questions?	Article Usefulness
	5 (most useful) 4 3 2 1 (least useful)

ANDREWS PITCH-FORK

Synopsys Pushing Higher

Comments

SUBSCRIBE TO OUR FREE EMAIL NEWSLETTER!

SUBSCRIBE TO OUR FREE
EMAIL NEWSLETTER!