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S&P 500   3,852.36
DOW   32,920.46
QQQ   303.59
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Energizer Holdings Inc; Losing Power Or Electrifying Time To Buy?
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ONSemi Is Marching Higher On Great Results
The #1 Energy Stock to Buy (Ad)
Can Cummins Power To A New High? 
Is BigBear.ai Stock a Diamond in the Rough?
S&P 500   3,852.36
DOW   32,920.46
QQQ   303.59
Mullen Automotive Stock, The Tide Has Turned
GRAPHITE: "Essential for America's National Defense" (Ad)
Energizer Holdings Inc; Losing Power Or Electrifying Time To Buy?
How to Find Penny Stocks to Invest and Trade
The #1 Energy Stock to Buy (Ad)
What Tyson Foods Q1 Means For Staples Stocks
ONSemi Is Marching Higher On Great Results
The #1 Energy Stock to Buy (Ad)
Can Cummins Power To A New High? 
Is BigBear.ai Stock a Diamond in the Rough?
S&P 500   3,852.36
DOW   32,920.46
QQQ   303.59
Mullen Automotive Stock, The Tide Has Turned
GRAPHITE: "Essential for America's National Defense" (Ad)
Energizer Holdings Inc; Losing Power Or Electrifying Time To Buy?
How to Find Penny Stocks to Invest and Trade
The #1 Energy Stock to Buy (Ad)
What Tyson Foods Q1 Means For Staples Stocks
ONSemi Is Marching Higher On Great Results
The #1 Energy Stock to Buy (Ad)
Can Cummins Power To A New High? 
Is BigBear.ai Stock a Diamond in the Rough?

Is Cadence Close To A Cup-With-High-Handle Breakout?

Is Cadence Close To A Cup-With-High-Handle Breakout?If you’re a student of chart patterns, you’ll notice that Cadence Design Systems (NASDAQ: CDNS) appears to be forming a cup with high handle.

Now, I’m well versed in many of these typical chart patterns. I’m not aware of any empirical data showing the probabilities of a cup with handle leading to a successful breakout, with a certain minimum return threshold over a specified period of time. 

That said, there is plenty of anecdotal evidence going back decades, documented in historical “model books” and the like, showing that a cup-with-handle pattern can indeed, lead to a profitable breakout. 

In a volatile market, like the one we’ve been experiencing since November, earnings have arguably been a more reliable catalyst for price gains. For example, Cadence shares popped after the company’s earnings report last October. 

That rally lasted until November, simultaneous with the broader market’s retreat. Just like the S&P 500 corrected and attempted to rally before rolling over on January 4, Cadence followed the same trajectory, topping out on December 28. 

Currently, the cup-with-high-handle buy point is $194.97. Many technical analysts recommend buying when the stock surpasses that point by $0.10, in heavy trading volume. Lower-volume breakouts can be successful, however. 

Moving In Tandem With The Market

But what to make of Cadence’s current retreat from that prior high, reached on August 16?

Well, for starters, and not coincidentally, that was the same day the S&P 500 notched a short-term high. You can easily see that with a glance at the SPDR S&P 500 ETF (NYSEARCA:SPY). 


There’s a widespread “common knowledge” saying that three-quarters of stocks follow the market’s direction. Whether that’s literally true or not doesn’t really matter, as it’s easy to see that stocks struggle to make gains while the broader market is choppy or in decline. 

Cadence is clearly tracking along with the broader market. The stock is tracked by the S&P 500, but constitutes only 0.14159% of the index. That means it’s going to move in tandem with index direction the majority of the time, unless some company- or industry-specific news sends the stock moving in the opposite direction, or in the same direction at a different rate. 

So what about its specific sector and industry? 

The Technology Select Sector SPDR ETF (NYSEARCA: XLK), which tracks the S&P large-cap tech sector, is down 20.26% year-to-date.

Cadence Outperforming The Tech Sector 

Cadence, meanwhile, is down just 6.18% so far this year, thanks largely to a strong rally that began in late July, following the most recent quarterly earnings report. 

The company earned $1.08 per share, up 26% from the year-ago quarter. Revenue was $857.5 million, up 18%. According to MarketBeat earnings data, Cadence beat views on the top and bottom lines. 

Those results also exceeded management’s guidance for the quarter. Cadence is well situated to take advantage of trends toward 5G adoption, artificial intelligence, and hyperscaling, which involves scaling a distributed computing environment as demand on the network increases. 

The company specializes in electronic design automation software and some related hardware for circuit designers. As the business environment for semiconductor design continues to rapidly evolve, Cadence appears to be in a good position. 

Companies in similar lines of business include Rambus (NASDAQ: RMBS), Navitas Semiconductor (NASDAQ: NVTS), Keysight Technologies (NYSE: KEYS) and Ansys (NASDAQ: ANSS)

Why is that important to know? Because when you select stocks for your portfolio, you don’t want too much overlap in terms of industry. You also want to understand which stock, among those with similar businesses, has the best potential for the level of gains you’re seeking. 

At this juncture, Cadence is showing the most price momentum, among that group of companies. However, analysts also expect Rambus and Keysight to show strong earnings growth in the next two years, as they do with Cadence. Be sure you understand how a stock you’re eyeing stacks up against similar companies.

Should you invest $1,000 in Cadence Design Systems right now?

Before you consider Cadence Design Systems, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Cadence Design Systems wasn't on the list.

While Cadence Design Systems currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Cadence Design Systems (CDNS)
1.9713 of 5 stars
$185.91+0.0%N/A65.46Moderate Buy$195.50
Technology Select Sector SPDR Fund (XLK)N/A$140.04-1.2%0.92%N/AHoldN/A
Rambus (RMBS)
1.5851 of 5 stars
$43.12-1.1%N/A-187.47Moderate Buy$44.00
Keysight Technologies (KEYS)
2.9332 of 5 stars
$179.23-1.2%N/A29.00Moderate Buy$200.25
Navitas Semiconductor (NVTS)
1.9332 of 5 stars
$5.65-2.6%N/A-9.42Moderate Buy$7.17
ANSYS (ANSS)
1.9503 of 5 stars
$272.43-1.0%N/A51.02Hold$263.55
Compare These Stocks  Add These Stocks to My Watchlist 

Kate Stalter

About Kate Stalter

Contributing Author: Retirement, Asset Allocation, and Tax Strategies

Kate Stalter is a Series 65-licensed asset manager, with more than two decades of experience in various areas of financial services. As an investment advisor and financial planner, Kate personally manages client portfolios, with a focus on successful retirement, including asset allocation, income generation and tax strategies. Kate also serves as a capital-markets contributor at Forbes.com, and is an expert columnist for the investment advisory channel at U.S. News & World Report.
Contact Kate Stalter via email at stalterkate@gmail.com.

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