Software stocks near a tactical bottom
The bear case for software is reaching exhaustion, presenting a tactical opportunity to cover shorts and look for a relief rally.
The argument
The guest argued that with 70% of software stocks hitting three-month lows - a level of indiscriminate selling reminiscent of the COVID crash - the trend is extremely stretched. They noted that even on bad earnings guidance, names like Workday have begun reversing higher, signaling a potential local bottom.
The thesis, stress-tested
✓ What validates it
- ✓Software stocks continuing to finish positive on negative or mediocre earnings news
- ✓A sustained shift in relative strength of software versus semiconductors
▸ Risks discussed
- ▸The broader downtrend remains broken and rallies may face overhead supply
- ▸Subsequent earnings reports could continue to show fundamental weakness
Hear it yourself
"70% of software stocks made three month lows last week. I mean, that is a Wild. COVID type level. That's a liberation Yes. Type level. I think at a minimum, it's a siren call to cover your shoes."
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