By Doug Busch
Software stocks have had an awful start to the year and technical indicators don't speak to any immediate reprieve.
The iShares Expanded Tech Software Sector ETF dropped 5% today and is already down a staggering 19% in 2026. The ETF has declined 10 of the past 14 weeks, with five of those weekly losses exceeding 5%.
One could run down the list of culprits and struggle to find a single bright spot. Technicians are quick to remind us that there's no reason to catch a falling knife until a clear technical catalyst emerges.
Microsoft, the fund's largest holding, has shed more than a quarter of its value since peaking on July 31. Salesforce has declined in 15 of the past 18 sessions and is down 44% from its most recent 52-week high. Oracle's drawdown has been particularly dramatic, falling 55% from its peak. "Old tech" software names like Adobe and Intuit are both off more than 40% from their annual peaks. I think one gets the picture.
The five-year weekly chart below offers a stark illustration of the malaise in software. The weakness is especially glaring on the IGV ETF's ratio chart versus the VanEck Semiconductor ETF. While IGV trades 28% below its most recent 52-week high, the semiconductor ETF is down just 5% from its own annual peak.
My view is that IGV is likely to gravitate toward the $75 area, which would represent a retest of the prior cup with handle breakout from November 2023. That level was tested in May and August 2024, and again last April, when a bullish piercing line candle provided a timely signal that a bounce was imminent.
More ominously, the 50-week simple moving average is now beginning to slope lower for the first time since early 2023. Trouble arguably began with back to back doji candles last August and resurfaced again in December. A move toward $75 would imply a 12% decline from current levels. At that point the group could be reassessed for signs of stabilization, particularly if bullish candlestick patterns begin to emerge in individual names.
Doug Busch is the senior technical analyst at Barron's Investor Circle . His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
February 03, 2026 17:13 ET (22:13 GMT)
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