Software Stocks Emerging as New Tech Leaders
CNBC reported Monday that software stocks are flashing early signs of sector leadership. Technical strategist Katie Stockton of Fairlead Strategies argues the group may be set to displace semiconductors at the top of the technology sector hierarchy.
Software Stocks Show Fresh Momentum
Stockton points to renewed strength in heavyweights Oracle and Microsoft as evidence that tech leadership is broadening out. Those two names had lagged while chip stocks hogged the spotlight. The shift in momentum is notable, according to her analysis.
Her focus vehicle is the iShares Expanded Tech-Software Sector ETF (IGV), which tracks the broader software universe. IGV recently gapped higher off its 50-day moving average near $83, a level Stockton now views as near-term support. The next meaningful resistance sits around $97.
What the Charts Are Saying
A weekly MACD buy signal has materialized for IGV, which Stockton says supports continued gains through the second quarter. On the daily chart, the ETF is tracing an inverse head-and-shoulders pattern, a formation typically associated with bottoming behavior. Short-term momentum is also expanding, adding weight to the bullish read.
Relative to the S&P 500, IGV is generating what Stockton describes as dual counter-trend signals from DeMARK Indicators. Those signals suggest that software’s prolonged stretch of underperformance versus the broader index has run its course. The ETF has already begun responding positively to those signals.
Background: A Sector Recovering From a Deep Slide
Software stocks endured a rough six-month correction heading into this period. Monthly stochastic readings had pushed into oversold territory, and sector sentiment remained subdued. The longer-term technical picture, however, remained intact. A monthly cloud model continued to support the secular bull trend that has defined the space for years. Stockton sees the current upturn in monthly stochastics, pending confirmation at the end of May, as evidence a multi-month base is forming.
Semiconductor stocks had captured much of the technology sector’s attention through late 2025 and into early 2026. AI-driven demand for chips powered outsized gains in names like Nvidia, pulling investor focus away from software. The Philadelphia Semiconductor Index remains elevated, but Stockton’s analysis suggests the trade may be maturing.
What Comes Next for Software
If the technical setup follows through, Stockton expects software to outperform the S&P 500 for at least several more weeks. A confirmed monthly stochastic upturn in May would strengthen the longer-term case further. Investors watching the sector will look to IGV’s ability to hold the $83 support zone and push toward the $97 resistance level as key near-term tests.
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