Big Software Stocks Are Languishing, But These 2 Disruptors Are on a Tear
Software stocks have had a rough ride in 2026, After a recent rally, the bellwether iShares Expanded Tech Software Sector ETF ($IGV) is basically flat for the year. Software is underperforming tech as well as the broader market.
The big names in software have languished in 2026. Microsoft ($MSFT) has gained just 3.6%, while SAP ($SAP) has lost about 9%.
Of course, there have been some bright spots, particularly in cybersecurity. Palo Alto Networks ($PANW) has soared 89% this year, while CrowdStrike Holdings ($CRWD) boasts a 63% gain.
Software Is Evolving
One of the reasons for this sector’s poor performance is the emergence of new competition. Companies are learning how to fulfill their software needs without the help of traditional providers.
Instead, newer companies are providing platforms and AI coding tools to streamline, and in some cases automate, the software creation process. Two such companies have recently appeared on my radar.
GitLab
GitLab ($GTLB) provides users with an end-to-end platform to design customized software. This all-remote company has team members located in 65 countries.
GitLab has been on a tear, gaining 25% over the past month. Right now, GitLab is consolidating those gains, in the form of a pennant pattern (black lines). The pattern suggests a rally to the $50 area, a potential profit of about 22% from Tuesday’s close.
GitLab competes with GitHub, which was purchased by Microsoft for $7.5 billion in 2018. GitLab’s current market capitalization is about $7 billion.
Atlassian
Another GitLab competitor is Atlassian Corp. ($TEAM), which boasts a much larger market cap of $41.9 billion. Atlassian has soared 72% in just the past month.
Shares of Atlassian have formed a similar consolidation pattern to GitLab, suggesting a further rally to the $215 area. That formation indicates a potential gain of about 30% from Tuesday’s closing price.
Risk Management
These are speculative names. Neither GitLab or Atlassian are currently profitable.
Both names have soared in recent weeks, so traders should approach with caution. This means starting with a smaller-than-normal position size, and having an exit plan in the event of a reversal.
I’m looking at the 50-day moving average for GitLab (blue), and the 20-day moving average for Atlassian (green). Both of these names are considered momentum stocks. If either falls below its designated moving average, the momentum will be broken, and the trade should be exited.
Traders have the option of exiting earlier at their discretion.
At the time of publication, Ponsi was long PANW, TEAM, and GTLB.
