CRM Stock – Salesforce.com Looks Ready to Break Higher

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Shares of customer relationship management software maker Salesforce.com (CRM) have mostly worked sideways since the company reported earnings in August. But the sideways trot has recently turned bullish, and active investors might soon be able to pounce.

beat the bellWhen Salesforce.com reported its second-quarter earnings on Aug. 21, investors reacted cheerfully and pushed CRM stock higher by more than 7% the following day. The company beat expectations on both the top and bottom line for the second quarter and raised its guidance for 2015 sales to a range of $5.34 billion to $5.37 billion, versus analyst estimates of $5.34 billion.

A little over one week before the report I laid out some reference price levels and discussed how one could trade CRM stock into and after the earnings report. Specifically I wrote:

“If the stock should rally after earnings back above the 200-day moving average around $55.90, then you could consider a long-side trade with a target in the mid-$60s. If the downside becomes more pronounced after earnings, a price target around $44 looks probable .”

With the gap-higher rally on Aug. 22, clearly the second scenario has taken place, which is the trade setup I now want to discuss in a little more detail.

On the multiyear logarithmic weekly chart, note that the support line for CRM stock from 2012 remains intact, although it got close to breaking down in August, before the earnings report. From this point of view, as long as the support line holds, CRM stock stands a good chance of revisiting its April highs in the mid- to high $60s.

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On the daily chart, note that the post-earnings rally on Aug. 22 marginally pushed CRM stock above its early-July highs on a breakaway gap rally. The breakaway gap is a powerful move, and CRM stock has been consolidating in a tight manner ever since, building a higher base from which to make another move higher soon. The higher base — i.e., the consolidation period over the past couple of weeks — has also taken the shape of a bullish wedge pattern. A measured move on a break higher would just about coincide with the stock’s late-April highs in the high $60s.

Active investors could thus look to buy CRM stock on a break past $60.50 for a move into the high $60s. Any break back below $57.70 would nullify the setup.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/crm-stock-salesforce-trade/.

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