Although we have discussed the basic material theme extensively, we think there is still more attention to be paid to this appealing sector. But today we're taking a break to focus on technology. Sure the sector has been beat up, but we've found a company that is benefitting from industry trends and could accelerate when the economy begins to recover.
We're looking at BMC Software
(BMCS)
. BMC's software helps in the management of large computer systems. Earnings have been rising due to surprising strength in the mainframe computer business.
BMC's software helps companies monitor the entire mainframe operating environment, identifying problems that could cripple computer networks. The software isn't a breakthrough technology. Instead, it's a tool to help business save money.
To be sure, BMC has been executing well in a difficult environment. The market has picked up on this improvement as shares are up 30% from lows hit last summer. Not bad when you consider that most technology shares are far off their highs.
There aren't many stocks that are under accumulation right now, so this one stands out us. After a small spurt higher to end 2007 the stock had succumb to the overall market pressures taking the stock back to key support in the $29-30 level. While the market has not recovered much from this January lows, BMC has had a decent rally pushing higher to the $33-34 level in recent weeks. Key support is now found in the $32 area with upside potential to the upper $30's.
The recent strength has been accompanied by strong volume -- an indication of buying interest and accumulation. We would look for this strength to continue and expect a move back towards the previous highs. Traders can establish long positions at current levels using a stop in the $31.50 level.
At the time of publication, John Hughes and Scott Maragioglio did not hold any positions in BMC.
Hughes and Maragioglio co-founded Epiphany Equity Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indices and sectors. Hughes advises numerous asset managers, hedge funds and institutions managing in excess of $30 billion. Maragioglio is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Maragioglio has also served on the board of directors of the AAPTA.
