Cadence Design Systems (CDNS) is on a roller-coaster ride. CDNS stock soared past the buy point in a cup-with-handle base Wednesday, rising toward its all-time high, set on June 20. On Thursday, Cadence fell nearly 6% after peer Synopsys (SNPS) reported disappointing quarterly results and a weak forecast.

It remains to be seen whether electronic design software maker Cadence will quickly recover and continue its strong upward drive, or whether Synopsys' results indicate weakening in the chip design sector overall, which could pull Cadence down too.

Meanwhile, the IBD Relative Strength Rating for Cadence stock got an upgrade from 69 to 76 on Thursday amid rising earnings and revenue growth rates. The 76 rating shows that Cadence is in the top 25% of all stocks for price performance this past year.

Cadence Design is an adjacent play on the artificial intelligence industry juggernaut. It provides software to the chipmakers striving to catch up with AI market leader Nvidia (NVDA).

Cadence No. 1 In Its Industry

One thing that could help shield Cadence from a sector downturn is that it earns the No. 1 rank among its peers in the 12-stock Computer Software-Design industry group. Synopsys and Autodesk (ADSK) are also among the group's highest-rated stocks.

Regarding top and bottom line numbers, Cadence Design Systems has posted two quarters of accelerating earnings growth. In fact, over the last three stanzas the company reported a sharp turnaround.

Cadence saw a 9% dip in earnings for the March-ended quarter, a 5% rise and then a 30% surge last quarter to $1.64 per share. Top line growth has also moved higher over the same time frame. It recorded a 19% gain in revenue in its most recent quarter, to a record $1.28 billion.

Even Stronger Results Forecast

Analyst consensus is for earnings to surge 32% in the current quarter on a 26% spike in sales to $1.35 billion, according to FactSet.

Cadence Design Systems has a 309.96 buy point in its current base, a 3-1/2 month long cup-with-handle pattern.

IBD's unique Relative Strength Rating tracks technical performance by showing how a stock's price action over the last 52 weeks measures up against that of the other stocks in our database. The best-performing stocks tend to have an RS Rating north of 80 in the early stages of their moves. See if Cadence Design Systems can rebound and clear that threshold.

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