Technology Stocks, Software Leaders Hit Hard By Institutional Selling

Technology stocks were hit hard Friday and Monday as the Nasdaq composite lost a combined 2.9%. The weakness has investors wondering if it’s the start of something bigger

Software stocks lagged badly Monday as more than half of the day’s 10 worst-performing industry groups hailed from the sector. Losses ranged from 3.3% to 4.7%. But the software sector remains the top-ranked sector in IBD’s database. Even after falling 3.8% Monday, the sector is still up 21.9% year to date.

Technology Stocks Stumble

It’s important to pay attention when leading technology stocks from the market’s top industry groups start to falter. At the very least, it can be a sign that new leadership is ready to emerge. But it can also be a precursor to continued weakness in the major stock indexes. Both scenarios could play out.

As of Monday’s close, four groups still ranked inside the top 20 of IBD’s 197 industry group rankings based on six-month price performance.

The enterprise software group slumped 4% and closed firmly below its 50-day moving average. Salesforce.com (CRM) and Ultimate Software (ULTI) are still holding support at their 50-day lines, but the same can’t be said for ServiceNow (NOW), Upland Software (UPLD), Baozun(BZUN) and Paycom (PAYC).

 

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