By Doug Busch
For much of the recent stock market advance, software lagged badly as investors concentrated capital in semiconductors, AI infrastructure, and megacap hardware names.
If software now begins to strengthen on a relative basis, it could signal that the next phase of the tech rally is broadening beneath the surface rather than ending altogether.
The iShares Expanded Tech-Software Sector ETF $(IGV)$ rose fractionally last week by .7%. In a rare show of strength, it outshone the semiconductors, with the VanEck Semiconductor ETF dropping almost 2%.
The software ETF is reaching for a six week winning streak, which is impressive since the fund had not recorded consecutive weekly gains dating back to the start of the fourth quarter last year.
Today we will focus on ServiceNow and Adobe, which have rallied single digits over the last month and could play catch up to large-cap peers like Datadog and CrowdStrike, which have rallied 44% and 55%, respectively, since I wrote about them in May and April.
ServiceNow, a leading enterprise software company, has lagged, falling 50% over the last year and 32% year to date. It has risen 13% over the last one week period, with the bulk of that advance coming Monday, when it jumped almost 9%, making it the third best performer in the S&P 500.
Looking at the daily chart, several encouraging technical developments have recently emerged. The first was bullish RSI divergence between January and April, as the RSI formed higher lows while the stock itself made lower lows, often an early sign that downside momentum is weakening.
On Monday, the stock reclaimed both its 50-day simple moving average and the very round $100 level. That move was important because $100 previously acted as support throughout February, March, and April, and bulls did not want to see former support turn into new resistance. The small upside gap Monday completed a bullish island reversal following the sharp 18% gap down on April 23.
In addition, the 21-day exponential moving average has now turned higher, placing the stock back above an important momentum indicator. Monday's close also pushed the stock above a bear flag, and technicians often note that failed bearish patterns can lead to fast moves in the opposite direction. The stock could reach $150 later in the second half of the year, a 46% gain from current prices. Remain bullish above $95.
ServiceNow was trading around $102 Tuesday.
Adobe, a former software leader, has fallen on hard times, dropping 38% over the last year and 27% year to date. The stock has declined six of the last seven times after reporting earnings, but it has advanced four of the last five weeks, closing in the upper half of the weekly range each time.
Looking at the daily chart, the stock's ratio chart against the IGV software ETF has lagged since February after a brief period of outperformance during the fourth quarter. Even so, the technical setup has recently begun to improve with the emergence of a two-month bullish ascending triangle.
On Monday, the stock showed notable relative strength, rising 3.2% and easily outperforming the IGV's 1.2% advance while also reclaiming its 50-day simple moving average. Other things to admire are the completion of a bullish morning star on April 13, followed by a hammer on May 14 and a bullish island reversal triggered by the 4.5% gap higher on May 15.
Look for the stock to potentially advance toward $300 by mid-2026, implying upside of roughly 17% from current prices. The bullish outlook remains intact above $245.
Adobe was trading around $256 Thursday.
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.
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(END) Dow Jones Newswires
May 19, 2026 12:10 ET (16:10 GMT)
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