Canada has 24 software stocks in the Technology Sector. That makes it a little on the small side compared to some of the other sectors. I will roll through the top 6 in this article to point out a few that could be interesting for investors.
Intertain Group (IT.TO) seems to have broken back above the 200 DMA after a three wave correction. Intertain continues to make higher highs and higher lows after a major December low. The MACD looks ready to turn up above the zero line. The SCTR has moved above 75 and looks strong here.
Kinaxis (KXS.TO) has a great looking chart that looks ready to accelerate higher. Today it is back to test the previous highs.
Open Text Corp (OTC.TO) continues a strong trend of higher highs and higher lows. The SCTR has stayed above 75 for the last 7 of 8 months. We can see it has made new 52 week highs.
The next stock is RDM Corp. (RC.TO). It has a more gradual uptrend in progress. It recently bounced off the $4.30 level that has been a support/resistance level for a while. The volume is very light, but it continues to work.
Amaya Gaming (AYA.TO) has been in a significant downtrend. After losing 60%, Amaya has bounced up to a resistance level around $20. This is a typical place for a stock to fail or break out into a new uptrend. What makes this a major point? Both the resistance line and the long-term moving average are significant technical hurdles. A break above the 200 DMA would be a first since the downtrend kicked in. Notice the stall in October and November at the 200 DMA. Obviously, moving above resistance would also improve the investor sentiment in the stock. The SCTR is still hovering around 50, which is less than a leadership stock above 75, so that is a bit of a problem. The nice part is the SCTR is performing better than it has for the last 6 months. The Relative Strength is breaking out to three-month highs and does not have far to go to break out to new 8-month highs. As the stock starts to outperform, it will attract new interest. All of this is piling up to make this a critical time for the chart. A failure here suggests more downside for the stock. A breakout here suggests an important change in trend.
The last stock to look at today is MacDonald Dettwiler and Associates (MDA.TO). This tight trading range between $80 and $87.50 is an important range. We can see the range is midway between the highs and lows on the chart. $85 is the center of the chart. The Relative Strength has not broken down so this has an opportunity to turn up and start moving above the range. Until the breakout happens, this is a tough stock to own.
So these are some of the stronger stocks in the Canadian Software landscape currently. In this tough market that has been trading in a range for 18 months now, I think it is prudent to stay with the best. Some of the other stocks are trying to rally, but these are the strongest based on the SCTR.
I will be in Toronto for the CSTA AGM on Wednesday. Hopefully, we'll see you there. Tom McClellan will be speaking live in Calgary on Tuesday. Click here to register for the Calgary event.
Good trading,
Greg Schnell, CMT, MFTA.
