Leading Software Company Clears 20-Day EMA

For those of you who don't know, we maintain 3 portfolios of 10 equal-weighted stocks for our EB.com members.

We have our Model, Aggressive, and Income portfolios. We change our holdings every 90 days, just about the time that earnings season comes to a close. So our portfolio "drafts" occur on February 19th, May 19th, August 19th, and November 19th.

During our latest draft on August 19th, we became much more aggressive, adding mostly growth stocks to our portfolios as the market's recent rotation to growth at the June low suggested doing so. Our Model and Aggressive portfolios have outperformed the S&P 500 by 4 to 5 percentage points this quarter, despite being loaded with growth stocks during a period when the S&P 500 has gone straight down. I believe this is a very good sign that the market has bottomed or is in the process of bottoming.

One of our Aggressive portfolio stocks, Synopsys (SNPS), gapped back above its 20-day EMA on Tuesday and could be poised for further gain:

Enter Synopsys, Inc. (SNPS):

SNPS shows a very strong AD line and it's one of the strongest software stocks. So while its absolute price action has clearly been falling apart, it's remained an excellent relative performer. That gives me a very bullish feeling when software stocks in general begin to recover. We've seen the group's relative strength return the past week or so and SNPS has exploded higher to clear its 20-day EMA. The last two times we've seen SNPS's PPO turn up and cross its trigger line, a significant intermediate-term bottom was reached. That's what I'd expect here as well.

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