MW A bullish indicator for software stocks just flashed. Why a true comeback could be in the cards.

By Christine Ji

After a five-month slide fueled by AI disruption fears, the software sector has closed above its 50-day moving average in a key technical breakout

Oracle's stock has been a standout gainer this week.

For the first time since November, software investors may have a reason to be optimistic.

The iShares Expanded Tech-Software Sector exchange-traded fund IGV just accomplished a feat unseen in five months, closing above its 50-day moving average on Wednesday, according to Dow Jones Market Data. It's a major victory for the fund, which is viewed as a proxy for the software sector and which has been experiencing a relentless selloff in the face of artificial-intelligence concerns.

The 50-day moving average is a technical indicator calculated by averaging the closing price of a security over the past 50 days, and it serves as an indicator of current price momentum. The indicator is quicker to react to changes in market sentiment relative to the 200-day moving average, another technical benchmark that tracks longer-term trends.

The IGV's breakout above the 50-day moving average "could lead to continued short covering and potentially momentum buying," Mizuho managing director Daniel O'Regan wrote in a Thursday note. Closing above the 50-day moving average can trigger quantitative funds with price-based algorithms to buy in.

Notable software gainers include shares of Oracle $(ORCL)$, which have rallied 28% since the beginning of the week. Microsoft's stock $(MSFT)$ has increased 13% and Salesforce shares (CRM) have gained 10% over the same period.

Also read: Oracle's stock is trading at an extreme discount to this key technical indicator

Anthropic's new model, Claude Mythos, has been the latest thorn in the side of the software sector. Anthropic has warned that the model - which was accidentally leaked in March and is now in limited preview to select companies - is its most powerful yet and could have serious cybersecurity ramifications.

The selloff eased off early this week, and some analysts think investors have taken advantage of cheap entry points after an overreaction to Mythos. The IGV recorded a 5% gain on Monday to deliver its best daily performance in over a year. The fund is up about 14% since the start of the week.

Even with the positive momentum, the IGV has shed 30% since its recent peak in September of last year.

Read on: Oracle's stock stands out as the software sector bounces to its best day in a year

Evercore ISI analyst Kirk Materne is more skeptical about the prospect of a lasting software recovery.

"The group moving as a monolith creates some concern about how durable this rally is," Materne wrote in a Thursday note, pointing out that small-cap and midcap software names have surged alongside large-cap stocks.

While Materne believes the comeback is warranted for high-quality companies such as Microsoft and Salesforce whose valuations had veered into "value territory ... despite solid fundamentals," many of the smaller stocks have "more questionable prospects in an AI world," he said.

Materne expects that software stocks will go through a sorting process, meaning that successful software investors will need to be discerning when looking for opportunities. New model releases or AI capabilities could further rattle the sector.

"In general, we believe investors should remain selective as we expect volatility to remain high," he added.

-Christine Ji

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April 16, 2026 09:59 ET (13:59 GMT)

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