Software Stocks Showing Signs of Life

Software stocks posted their strongest bounce in over a month and a half last week, as markets positioned for an upbeat earnings season and capital rotated into oversold sectors on growing optimism around an Iran deal. But technically speaking, is this enough to build further momentum, or is the latest move short-lived?

The iShares Expanded Tech-Software Sector ETF (IGV), widely used as a proxy for the software trade, gained over 13% last week. Its heaviest-weighted names like Oracle (ORCL), Microsoft (MSFT), and Palantir (PLTR), each carry a weight of more than 8% within the index. Oracle was the clear standout, surging over 25% on a combination of short-covering, favorable headlines, and the broader risk-on tone across equities.

Turning to the technicals, the 3-year weekly chart of IGV shows several developments that suggest the tone may be shifting, at least in the near term. Last week marked IGV's first weekly close above the 200-week simple moving average in a month, and the candle itself — a large green body with only a small upper wick — signals that buyers stepped in with force. The first major hurdle ahead is the 20-week simple moving average, currently sitting around $91.35. A break above that level would put $100 in focus as the next area of resistance and a key psychological threshold.

Popular oscillators are also looking constructive. The RSI has officially printed a higher low, suggesting a shift to the upside is beginning to materialize in the price action. The weekly Moving Average Convergence Divergence (MACD), which measures the difference between the 12-week and 26-week exponential moving averages (EMA), appears to be setting up for a bullish cross if the index can extend gains through the week.

That said, the picture isn't all bullish. IGV is still printing lower lows since breaking down from its highs in late October of last year. And with software earnings kicking into full gear next week, the fundamental announcements could ultimately be the make-or-break catalyst for many of these names.

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