Cadence Design Systems (CDNS) had a rough session yesterday, finishing the day down roughly 5.5% from Friday’s close. The move was notable, but it didn’t come out of nowhere. CDNS has been under steady pressure for months now, with price trending lower since August and sitting more than 25% off its prior highs. This has been a persistent, methodical decline rather than a single emotional breakdown, which is an important distinction when I’m evaluating the technicals.
Looking at the daily timeframe, CDNS is currently trading within a clearly defined downsloping parallel channel. While the trend itself is lower, this structure is often viewed as a bullish pattern, particularly when price remains orderly and respects both sides of the channel. From a technical perspective, this type of controlled pullback can serve as a base for a reversal rather than a signal of deeper structural weakness.
The key level I’m watching is the upper boundary of this downsloping channel. A decisive break above that trendline would signal a shift in momentum and, in my view, open the door for a sharp move higher. When price has spent months compressing within a defined range like this, a breakout can lead to an explosive reaction as sellers step aside and momentum traders re-engage.
From a trading standpoint, there are two clean ways I would look to approach this setup. The first is an entry on a confirmed break above the downsloping trendline. The second is to wait patiently for a breakout, then look for a retrace back toward the former channel resistance as potential support. Both approaches allow traders to define risk clearly while staying aligned with the broader technical structure.
For background, CDNS has been in a sustained corrective phase since late summer, steadily working lower within this channel rather than collapsing outright. The recent selloff fits within that same pattern and keeps the technical picture intact. Because of that, my focus remains less on the single down day and more on how price behaves around the boundaries of this longer-term structure.
Regardless of how compelling a setup may look, as always, proper risk management is essential. Levels should be defined in advance, position size should be intentional, and trades should be structured so that a wrong outcome is manageable. The technicals here are worth watching closely, but discipline is what ultimately determines consistency.
Source: https://www.fxstreet.com/news/the-bullish-channel-to-watch-on-cadence-design-systems-202602241455
