Managing Editor’s Note: Did you know you could turn a crash into cash in your pocket?
Our colleague, tech investor Jeff Brown, gave his readers the chance to turn a 49% crash in Wolfspeed into a $22,500 payout, a 13% quick drop in Amer Sports into almost $25,000 in just five days, and a 21% drop in Valaris into $30,000 in just about three weeks.
And at his upcoming AI Doomsday event, he’ll show you how on Wednesday, April 8, at 2 p.m. ET. Click here to automatically RSVP…
Investors have had no place to hide from the recent pullback.
The S&P 500 has fallen as much as 7% year-to-date. That may not sound like a bad drawdown, but the action elsewhere has been much worse.
The “Magnificent 7” dropped by 15%, which is the worst decline for the group since 2024.
But the selling pressure isn’t just confined to mega-cap tech and AI stocks. At one point, 39% of S&P 500 stocks were down 20% or more from their 52-week highs.
Some sectors were already hit by selling even before the war between the U.S. and Iran, and they are back to testing key levels.
That includes one ETF I highlighted in February that saw a short-term rally from a bullish setup.
Can lightning strike twice and create another tradeable chart setup?
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Before the conflict in the Middle East took center stage, investors were worrying about whether advances in AI would disrupt software stocks and their lucrative subscription-based business models.
“Software as a service” (SaaS) companies include names like Microsoft (MSFT) and Palantir (PLTR), whose share prices plunged to kick off 2026. But they were hardly the only ones suffering.
As AI fears grew, software stocks plummeted in what some termed the “SaaSpocalypse.”
But back in February, it looked like the downside went too far. A mean reversion opportunity appeared at a key level for the iShares Expanded Tech-Software Sector ETF (IGV), which tracks software and SaaS stocks.
I had this to say then:
As IGV tests the low on this recent move, the RSI is making a higher low, which shows that downside momentum is fading.
IGV also traded 19% below its 50-day MA. It has only traded further below its 50-day MA less than 1% of the time.
It’s not just oversold conditions that could set up a massive reversal. Key chart levels are coming into play.
That chart level helped spark a 7.5% rally in just 11 trading sessions from the time I highlighted the setup.
Now the recent sell-off across the market is taking IGV back down to test support once again… and similar conditions are emerging to spark another reversal.
The SaaSpocalypse concerns may have faded slightly, but now the broader market downturn is driving software stocks lower once again.
The same chart level I highlighted before is coming into play… along with another round of positive divergences. Here’s the updated chart:
IGV is trading back at the $77–$80 zone. Not only was that level tested at the end of February, but you can see how this major support zone has sparked a rally on multiple occasions going back to 2024.
While the 50-day moving average (MA – blue line) is catching up to price, a large positive divergence is forming with the Relative Strength Index (RSI).
The RSI measures underlying price momentum and is making a much higher low compared to when the price was at the same level in February (dashed line). That shows downside momentum is fading alongside this test of a major support zone.
While there’s no guarantee that IGV will bounce hard off this level once again, price support, RSI divergence, and investor sentiment around AI and SaaS stocks are a powerful combination that could spark another rally.
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict
Reading Trading With Larry Benedict will allow you to take a look into the mind of one of the market’s greatest traders. You’ll be able to recognize and take advantage of trends in the market in no time.
