Software Stocks Feel the Blues, But Some Look Set To Rebound

The New York Stock Exchange during the Circle internet Group IPO in New York on June 5, 2025. (Michael Nagle/Bloomberg)

The software space continues to show signs of fragility, with several large-cap names experiencing meaningful drawdowns. A notable exception has been Palantir , among a select few helping to prop up the iShares Expanded Tech-Software Sector ETF IGV. Still, some names look vulnerable to further downside.

One is Circle internet Group , the financial software player, which appears poised for a deeper pullback. My downside target sits at $135, which would fill the gap from June 13 and mark a retest of the bull flag breakout from June 16, a sensible technical level for buyers to reassess positioning.

Circle internet Group was trading at $148.85 Thursday.

Another software name where the selling may actually be overdone is GitLab , now revisiting the $40 level, which acted as solid support in both April and June. This time, the technical setup looks more encouraging.

Wednesday, the stock completed a bullish morning star pattern (circled), rallying 6% on the strongest daily volume in the past eight weeks. It also closed at the top of its daily range in an encouraging show of relative strength, especially on a day when the broader market wobbled and the iShares Expanded Tech-Software Sector ETF IGV finished flat. I remain constructive above $38.

GitLab was trading at $40.71 Thursday.

Fortinet , prominent in cybersecurity software, is struggling in 2025, down 17% year to date largely due to a harsh 22% post-earnings drop on August 7. That selloff marked the largest single-day percentage decline in the stock’s history, with price action finding support at the round $70 level.

Interestingly, this area has been technically significant, acting as resistance several times between 2021 and 2024, following its 142% surge in 2021. Now successfully retested, that level looks poised to flip into support. From a risk/reward perspective, I remain constructive here as long as FTNT holds above $68.

Fortinet was trading at $77.89 Thursday.

AppLovin , a $150B software heavyweight, is up 35% year to date, showing impressive consistency in its trend. Notably, the stock hasn’t posted more than a four-week losing streak since Q4 2022. And on Aug. 7 it delivered its seventh straight positive earnings reaction, up 12%.

On the daily chart below, round number theory has played a key role, finding support at $200 in April and facing resistance near $500 in February. The stock successfully retested a double bottom breakout during June and July, and is now revisiting a cup base breakout pivot at $429.09. I expect this level to hold, setting the stage for a potential move back toward $500 by year-end.

AppLovin traded at $437.55 Thursday.

Write to Doug Busch at douglas.busch@barrons.com.