Mapping the Market: After remarkable comeback, software stocks face a key test

Chart watchers are now asking, can it keep climbing? The iShares Expanded Tech-Software Sector ETF (IGV), a broad measure ‌of the space, recently posted its biggest three-day gain since October 2001. Microsoft makes up more than half of that index but less than 10% of IGV, giving the ETF a wider view of the sector's health. That ⁠said, the ​charts are flashing a cautionary ⁠signal.

The software sector has been on a wild ​ride. After tumbling more than 37% from its September ​2025 peak to its April lows ‌on ​fears AI could wreck their business models, the group has bounced back sharply. Chart watchers are now asking, can it keep climbing?

The iShares Expanded Tech-Software Sector ETF (IGV), a broad measure ‌of the space, recently posted its biggest three-day gain since October 2001. Since bottoming on April 10, it surged roughly 44%, closing at $107.70 after a 6% jump on Monday alone, according to data supplied by LSEG. That move pushed the ETF back into ‌positive territory for 2025, up about 1.9% year to date. For context, IGV is a better gauge of the broader ‌software sector than the S&P 500 Software & Services index, which is heavily skewed by Microsoft — a stock that still sits nearly 5% lower on the year. Microsoft makes up more than half of that index but less than 10% of IGV, giving the ETF a wider view of the sector's health.

That ⁠said, the ​charts are flashing a cautionary ⁠signal. The ETF has run into a key resistance zone — a price range between roughly $107.60 and $108.60 — defined by Fibonacci retracement levels. Think of these as ⁠natural "speed bumps" where markets often pause or pull back after a big move. After such a rapid climb, some consolidation would not be ​unusual, and on Tuesday, IGV fell 2.8% to end at $104.73. The broader recovery story should stay intact as long as ⁠IGV holds above its 200-day moving average near $99 and the uptrend line from the April low around $95. A decisive close above the current resistance zone would ⁠open ​the door to the next targets: a resistance line near $116, and ultimately a run back toward the record intraday high of $117.99.

What the chart shows: * Decline of more than 37% from September 2025 high to April 10 low — the weakest ⁠level in over two years

* Biggest three-day rally since October 2001, had IGV up ~44% from its April closing low, ⁠but still ~8.6% below its all-time closing ⁠high * Key resistance zone at $107.60–$108.60; a break above it targets $116 and the record high near $118

(Daily markets commentary from Reuters analysts on the signals financial charts are sending - and what they ‌might mean.) (Terence Gabriel is a ‌Reuters market analyst. The views expressed are his own. Editing ​by Burton Frierson and Rod Nickel)