Frank Cappelleri breaks down the charts on Microsoft.
The iShares Expanded Tech-Software Sector ETF has been getting a lot of attention, and rightly so. Since May 2024, the ETF has notably outperformed the greater SPDR Technology Trust ETF : +23% vs. +10%.
Things have recently accelerated in November, and Tuesday, the IGV Software ETF was one of just three ETFs we track to make new all-time highs. Overall, IGV has 118 components, but many of them are tiny. In fact, 80 holdings have index weightings less than 0.5% . Thus, the true leaders over the last three months have been these eight. Again, some of the very small names have had strong gains, too, but these are the stocks that have moved the needle and literally have pulled IGV to never-before-seen price levels. But there's a big one missing. Microsoft is the third biggest holding in both the S & P 500 and the NASDAQ 100 and by far the largest software stock in both indices. Within the IGV Software ETF, it also has the third biggest weighting, but it's behind both CRM and ORCL. More importantly, MSFT has been noticeably lagging the IGV ETF across various time frames. Over the last three months, for example, MSFT is +3%. Breaking down the Microsoft charts MSFT last made a new high back on July 5, when it hit $468 and promptly rolled over. Since then, it has traded in a volatile range. The good news is that dips have been bought, but rallies have been sold, which creates a messy short-term picture. Three of its key moving averages are trading within a point of each other. That rarely happens and connotes the kind of directionless trend that MSFT has endured for over the last three-plus months. Needless to say, the daily chart is not bullish, at least not yet. Zooming out to the weekly presents a different, and more encouraging, viewpoint. Indeed, MSFT remains inside of a large symmetrical triangle pattern, thus, it has more work to do before it attempts a breakout. The constructive part is that we've seen MSFT withstand similar multi-week trading ranges in recent years before finally breaking out. This happened near key lows and also near all-time highs . While every time is different, consolidation phases that happen in long-term uptrends have the tendency to resolve higher. Last, and certainly not least, MSFT's recent weakness combined with IGV's strong advance has caused the MSFT/IGV relative line to decline rather harshly. Here's the weekly chart. In fact, it's now produced just the third weekly MSFT/IGV relative oversold reading in the last 10 years. The potential good news is that: 1. the ratio line remains in a long-term uptrend and 2. the last two oversold conditions happened near major relative trading lows. In other words, if history serves as any guide, then MSFT's relative weakness vs. its group may be ready to reverse course once more. I f that happens, the stock will become a big part of IGV's potential next up leg. Not only has ETF hit new all-time highs, it has done so by breaking out from a multi-year bullish pattern. DISCLOSURES: All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
Markets Entertainment Exchange-Traded Funds Ishares North American Tech-Software ETF Microsoft Corp Business News
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