IGV: A tradeable low in a strong downtrend. Levels to watch (BATS:IGV)
The S&P 500 had its worst first half since 1970. You may have heard of it. On a total return basis, the -20.6% drop was actually the biggest drop since the first half of 1962, when it fell 26.5%. Dig into the poorer sectors, you will find communication services (XLC) and Consumer Discretionary (XLY) which were both down around 30% through last Friday. Between those two horrendous numbers is the tech software industry fund, down 31.1% so far in 2022.
2022 sector returns: IGV among the biggest losers
The iShares Expanded Tech-Software Sector ETF (BAT:IGV) seeks to track the investment results of an index composed of North American stocks in the software industry and stocks in the interactive home entertainment, media and services sectors, according to iShares. With over $4 billion in net assets and an expense ratio of 43 basis points, it is a popular trading vehicle to play in the volatile software niche.
IGV is currently on a massive decline from its all-time high in November 2021, but stocks have found some support near the pre-pandemic high and 2Q 2020 pullback lows. With a 39% drop, that’s a lot more important than a bear market compared to the declines seen from 2011 to 2020.
Historical IGV draws: the most important since the GFC
IGV is heavily weighted in a handful of high-profile tech stocks. Microsoft (MSFT), Salesforce (CRM) and Adobe (ADBE) each represent around 8% of the fund’s portfolio. These companies have relatively high price-to-earnings ratios, but with decent growth, their PEG ratios suggest reasonable valuation given the significant declines in share prices this year.
S&P 500 PEG Ratio Heatmap: Some Cheap Tech Stocks
What will be particularly interesting to observe in the coming weeks is what happens during earnings season. Tech companies begin reporting the week of July 25, according to the Wall Street Horizon Corporate Events Calendar. This is also when the next Fed decision will arrive, so expect volatility to increase as the month progresses.
Tech gains begin in the last week of July
The technical grip
As for the charts, IGV is near key long-term trend support. I prefer to analyze the trend rate over extended periods with log scale charts. From the GFC lows to the 2016 corrective low, then through today, an uptrend support line is in play. A move below this line could result in significant further losses.
In-Game Long-Term Helpline
The short-term aspect gives more precise levels to monitor. Traders can take a long hit here with a stop below the May and June lows in the mid $250s. I don’t often show volume by price, but I think it’s appropriate here. Notice the high volume of shares traded in the $335-$365 range. A rally could come to a halt when this zone is hit due to a supply of stocks seeking to sell at the psychologically important equilibrium level. $300 to $305 could also be tricky.
IGV: Resistance near $305 and volume spikes by price
While in a strong downtrend, the tech software ETF is gearing up for a bounce here, but profits should be taken first on approaching $300, but more aggressive traders might look to the sidelines. $335-$365 zone for resistance. A stop below the May-June lows is prudent to cut losses.