The market continues to rotate beneath the surface, and while the indexes still look relatively healthy overall, there are some important shifts happening that swing traders need to pay attention to right now. Over the last several weeks, leadership has primarily come from semiconductors, hardware, and big tech. That momentum has helped keep the broader indexes elevated even while many individual stocks and sectors lagged behind.
Now we are beginning to see signs of rotation. Semiconductors are cooling off a bit, market breadth has weakened, and software stocks are starting to emerge from long bottoming formations. That creates opportunity for swing traders who understand how money rotates from one leadership group into another.
This week’s focus is on software names showing strong technical action, improving relative strength, and actionable setups.
Oil Remains the Most Important Chart in the Market
One of the charts we continue to monitor closely is oil. Right now, it may still be the single most important macro chart impacting the broader market.
The concern is simple. Oil recently pushed into a key multi-year resistance area that dates back to 2018. Intraday, the move briefly broke above that level before reversing and forming an inverted hammer candle. For traders, that type of candle matters because it often signals exhaustion after a breakout attempt.
If oil can continue pulling back from here, consolidate, and eventually lose its recent breakout area along with the 50-day moving average, that would likely be a positive development for the overall market and especially for consumers heading into the summer months.
Higher oil prices tend to create pressure across multiple areas of the economy. Transportation, retail, restaurants, and consumer discretionary spending all become vulnerable when energy prices remain elevated. That is why this chart matters so much beyond just the energy sector itself.
For now, the failed breakout attempt gives traders at least a short-term signal that oil may need to cool off before making another move higher.
Market Breadth Has Been Weakening Beneath the Surface
One thing we have discussed repeatedly over the last several weeks is that the rally has not been as broad-based as many traders assume.
The S&P 500 has looked strong on the surface largely because the index is capitalization weighted. That means the biggest companies have an outsized influence on the index itself. Big tech, semiconductors, and AI-related hardware names have done much of the heavy lifting.
However, when we look at equal-weight indexes, the picture becomes very different.
The equal-weight version of the market has lagged significantly. That divergence has been warning us that participation underneath the surface has been weaker than the headline indexes suggested.
Now we are starting to see some of that weakness show up more clearly. The recent pullback in the market is not large yet, but after such an extended move higher, some consolidation or retracement would actually be healthy.
Even a deeper pullback toward major support levels would still keep the broader uptrend intact. The important thing for traders is not to become emotionally attached to short-term movement. Markets often need to work off extended conditions either through time or price.
Semiconductors Are Cooling Off While Software Strengthens
Semiconductors have been one of the hottest groups in the market for months. Hardware, communications infrastructure, and AI-related names have all participated in the move.
Now we are beginning to see some profit taking in those areas.
At the same time, software stocks are beginning to strengthen. This is exactly the type of sector rotation swing traders want to identify early.
The software sector has been quietly building large bottoming formations and recently started breaking higher from those bases. That type of setup often leads to multi-month trends once momentum begins building.
Many software stocks already started showing relative strength before the broader group fully confirmed the move. Stocks like CrowdStrike Holdings, Inc. have already broken into powerful momentum trends, while others are just beginning their next leg higher.
That makes software one of the most important areas to watch right now.
7 Software Stocks to Watch This Week
1. CrowdStrike Holdings, Inc.
CrowdStrike continues to be one of the strongest names in software. The stock recently broke through a major resistance level and accelerated rapidly higher.
The challenge now is timing an entry without chasing extended price action.
The ideal scenario would be a pullback toward the breakout zone followed by stabilization and a remount higher. Often after a stock breaks to new highs, it will temporarily retrace to test that breakout area before continuing higher.
That type of retest creates a much better risk-to-reward entry for swing traders.
2. Datadog, Inc.
Datadog remains one of the cleanest long-term software charts in the market.
The stock had a massive run during the pandemic era, went through a long corrective phase during the bear market, and now appears to be re-entering a powerful momentum cycle.
Recent earnings helped push the stock back above a key range. Unlike some of the more extended names, DDOG still offers traders a potentially actionable setup here.
This is the type of stock where traders can use a wider stop while targeting a significantly larger move. The volatility is higher, but so is the upside potential if software leadership continues expanding.
3. Wolfspeed, Inc.
WOLF has been trending steadily higher and is currently pulling back post earnings.
The key area to watch is the 50-day moving average along with the prior breakout zone. If the stock can pull back into support and show strength there, it could offer a strong swing trading opportunity.
Another possible setup would involve the stock consolidating briefly and then reclaiming recent highs with momentum.
Patience matters here. The goal is not simply buying because the stock looks strong. The goal is waiting for confirmation at support or on a breakout remount.
4. UiPath Inc.
UiPath has quietly been building momentum after a long bottoming process.
This is one of those stocks where the technical structure matters more than short-term headlines. The stock spent a long period basing and now appears to be transitioning into a new trend phase.
The key for swing traders is avoiding emotional chasing after extended candles and instead focusing on controlled pullbacks and continuation patterns.
If software rotation strengthens further, PATH could become one of the higher beta beneficiaries.
5. Aurora Innovation, Inc.
Aurora fits one of our favorite longer-term setups: the IPO cycle.
Many IPO stocks collapse after their initial excitement phase. However, after one or two years of basing and capitulation, the strongest companies often begin rebuilding toward their prior highs.
AUR appears to be entering that phase now.
The stock still sits well below its IPO highs, which means there is significant upside potential if momentum continues building. Traders can approach this either as a longer-term swing toward those prior highs or as a shorter-term momentum trade.
6. Zoom Communications Inc.
Zoom has spent years rebuilding after its pandemic-era collapse.
What makes the chart interesting now is the size and duration of the bottoming formation. Large bases often lead to meaningful trend moves once the stock finally breaks out.
The stock has already doubled off its lows, but structurally the chart may still be in the early stages of a larger recovery cycle.
Earnings later this week will likely determine the next major move. A strong reaction could trigger a significant breakout above the current range and potentially start a larger momentum run.
7. Hut 8 Corp.
HUT recently broke above a major prior high following a powerful earnings breakout.
The immediate focus now becomes whether the stock can hold its breakout area. If buyers defend support and momentum stabilizes, a move through the psychological 100 level becomes possible.
If the stock pulls back further, traders should monitor the gap-fill area closely for signs of accumulation and renewed strength.
Final Thoughts
The biggest story right now is rotation.
For months, semiconductors and hardware dominated market leadership while software lagged badly. Now we are starting to see that relationship reverse. Software is emerging from major bottoming structures at the same time semiconductors are cooling off after extended runs.
That does not mean semis are dead. It simply means leadership may be broadening.
For swing traders, these transitions create some of the best opportunities because institutions often rotate aggressively into new groups once prior leaders become crowded.
The key now is patience and discipline. Many of these software names are already extended short term, so the focus should be on pullbacks, remounts, gap fills, and continuation setups rather than emotional chasing.
The traders who consistently make money are not the ones who constantly force entries. They are the ones who wait for clean risk-to-reward opportunities within strong themes and sectors.
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