Leader In Computer Services Shows Mixed Signals

Computer services ($DJUSDV) recently set a 52-week relative high vs. the S&P 500 and one of its strongest stocks has been Science Applications International Corp (SAIC), which has risen more than 25% in the past two months, while the S&P 500 has been up less than half that.

SAIC recently posted solid quarterly results and raised its guidance for next quarter. The good news is that the stock has returned back to where it was prior to that earnings release, or has "filled its gap." Check this out:

Enter Science Applications International Corp (SAIC):

While this gap support would be an obvious level where SAIC could reverse, we also need to be aware that the latest price high was accompanied by a negative divergence. While I still believe that SAIC could be traded on the long side at this level, the negative divergence would tell me to make sure I keep a fairly tight stop - any close beneath gap support at 109.26 would prompt me to sell. In the meantime, it's quite possible that SAIC returns right back to its recent price high just above 115.

Happy Trading! Tom Bowley Chief Market Strategist EarningsBeats.com Better Timing. Better Trades.