Why Oracle Stock and 2 Tech Stocks Are Slumping Amid a Broader Rally

Software Stocks Face Technical Challenges

The software sector, once a beacon of growth and innovation, is now facing signs of fatigue. The iShares Expanded Tech Software-Sector ETF (IGV) has experienced a significant downturn, with a 3.6% drop last week marking its worst weekly performance in four months. This decline was accompanied by a bearish engulfing candle, a technical indicator that often signals a shift in market sentiment.

Over the past month, the ETF has slipped by 1% despite several high-profile mergers and acquisitions. However, these deals do not always translate into positive momentum for the sector. In fact, they may indicate that the software industry is entering a late-stage phase of its cycle. Companies such as Palo Alto Networks acquiring CyberArk, Salesforce absorbing Informatica, and Couchbase being taken private have not significantly boosted stock performance.

Despite this, the iShares Expanded Tech Software-Sector ETF has outperformed the VanEck Semiconductor ETF (SMH) since last year’s election. However, this lead could be temporary. Leadership names like CrowdStrike, Oracle, and Microsoft are showing signs of being technically stretched, which could lead to a mean reversion.

CrowdStrike at a Crossroads

CrowdStrike, long considered a top-tier cybersecurity company, has been acting unusually, dropping 13% over the past month while the broader software group remains relatively flat. The stock is currently near the $450 level, a key area where a former bull flag breakout occurred. A decisive close above this mark could reignite momentum.

However, if the stock fails to hold $450, it could retreat toward the $400 level. This price point aligns with previous inflection points at $200 and $300 from August and April of last year. The concept of round number theory suggests that these levels may act as psychological barriers. Additionally, Friday could bring the possibility of a five-week losing streak, something that has only happened once in the past five years. Could news of Alphabet selling all of its CrowdStrike stock be influencing the stock?

Oracle's Rally and Potential Pause

Oracle is having a strong 2025, with shares rising over 50% year-to-date. This surge has propelled Chairman Larry Ellison to the No. 2 spot on the world’s richest list. However, this rally might be getting ahead of itself. The weekly chart for the period ending July 25 showed a rare doji candle at all-time highs, a pattern that resembles a plus sign and often indicates indecision or trend exhaustion.

Technically, Oracle has done little wrong. It cleared the $200 level the week of June 13, leading to a powerful 24% gain and breaking above a well-defined double bottom base. However, after such a rapid rise, a pause is not unexpected. A potential pullback toward $225 by the end of August could offer a healthier setup for the next leg higher.

Microsoft's Strong Performance and Cautionary Signals

Microsoft, which recently flirted with a $4 trillion market cap, continues to perform well in 2025, up 25% year to date. It has also traded higher in 14 of the last 15 weeks. However, after its latest earnings report on July 31, the stock showed a potential warning sign. While shares initially surged 4%, they closed more than $20 off intraday highs, suggesting buyer fatigue.

Technicians have noted the emergence of a rare long red-filled candle, often signaling a shift in momentum. A similar setup appeared on December 28, 2024, and preceded a multi-month drawdown that didn’t end until April. With that context, investors should keep an eye on the gap fill near $515 from the July 30 session and consider the possibility of a test of the round $500 level by month’s end.

Microsoft was trading at $525.51 on Wednesday.

Conclusion: The Need for a Reboot

The current state of software stocks suggests that a reboot may be necessary. While some companies are performing well, the overall sector is showing signs of technical strain. Investors should remain cautious and watch for potential shifts in momentum.