Microsoft, ServiceNow Signal Software Rebound After 30% Sector Drop

Software ETF Signals Bottom After 30% Correction

Technical indicators for the iShares Expanded Tech-Software ETF (IGV) suggest its steep decline may have ended. The fund, which is trading more than 30% below its late September highs, has formed a double-bottom pattern, revisiting its lows from April 7. This price action occurred as the daily Relative Strength Index (RSI) formed a bullish divergence, with the indicator making higher lows even as the ETF's price pushed lower, signaling that downside momentum is weakening.

Further reinforcing a potential reversal, the ETF recently experienced a "bear trap." A price breakdown below the $80 pivot level initially appeared bearish but quickly reversed, trapping short sellers and forcing a sharp snapback. Such failed breakdowns often provide strong fuel for upward price moves, especially after an extended downtrend.

Microsoft Tests Key Support with 20% Upside Potential

Microsoft (MSFT), the largest holding in the IGV ETF at 10%, is exhibiting a compelling technical setup. The stock, trading around $402, is down 28% from its 52-week high near $550. It is now testing its rising 200-week simple moving average for only the fourth time in five years. Each prior test of this long-term trendline served as a significant buying opportunity, leading to higher prices.

This retest of long-term support presents an attractive risk-reward profile. Analysts project a potential move toward $480 in the second half of the year, which would represent a gain of roughly 20% from current levels. The bullish outlook remains intact as long as Microsoft's stock price holds above the critical support level of $388.

ServiceNow Eyes 44% Gain on Insider Buying and Chart Support

ServiceNow (NOW) has declined 51% from its recent 52-week high but is now showing signs of renewed strength. The stock demonstrated fortitude against its sector, rising 6.3% during the week ended February 13 while the broader IGV ETF remained flat. Investor confidence is further supported by a recent $3 million insider stock purchase by the company's CEO.

Trading around $108, the stock has returned to retest its May 2023 breakout level near $100, which also represents a classic inverse head-and-shoulders pattern. With the stock heavily oversold, this technical confluence creates a strong support zone. If the price stabilizes, analysts project a potential run to $150 by mid-2026, implying a 44% gain. The positive scenario holds as long as the stock remains above the $95 support mark.