From the desk of Tom Bruni @BruniCharting
While we wait to see whether or not this retest of all-time highs is a successful one, we want to define our risk on the long side in individual names that continue to lead the market higher.
One subsector that remains a consistent source of these setups is Software.
Below is a chart of Software relative to the Technology Sector overall, finding support right where it needed to at our previous price target. Whether prices can get back to their year-to-date highs will be an important tell, but for now the uptrend in this ratio remains strongly intact.
Click on chart to enlarge view.
One individual name that looks compelling at current levels is Coupa Software, which is breaking out of a 10-week base to new all-time highs. The stock could use a few days of consolidation before continuing higher, but from a risk management perspective we'd be buying a breakout above 103.25 and targeting 130.50 on the upside over the next 1-3 months.
With strong price action within a strong sector and about seven weeks until its next earnings date, this is the ideal type of setup we're looking for in this environment.
In the event that the market does pull back and takes the stock with it, then we take a papercut. But if the market continues grinding sideways or moves higher then Coupa Software and stocks like it should continue to lead.
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