Salesforce on a Slippery Slope

by Serge Berger | April 18, 2013 1:21 am

Serge Berger is the head trader and investment strategist for The Steady Trader[1]. Sign up for his free weekly newsletter here[2]. (NYSE:CRM[3]) — This software firm may ring a bell. Back in 2009 and 2010, the stock quickly became a trend followers’ favorite, as it could do almost no wrong. Finally, toward the end of 2010, the stock took its slope vertical with a large gap up, which proved to be too good of a thing and ultimately led the stock into a much choppier period.

CRM Chart
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While a marginal relative high was achieved in mid-2011, the stock ultimately retraced around 50% of the entire late 2008 to mid-2011 rally by the end of the year. From there, the stock again worked its way higher in a textbook fashion for those focusing on Fibonacci retracement levels.

In December 2012, along with many other stocks, CRM broke past a key multi-year resistance area, around the $161 mark, and didn’t find a top until early March.

CRM Chart
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Since the March top, the stock has worked its way lower in an orderly fashion, and in early April, retested the former resistance level at $161, which now acts as support.

In the past eight or so trading sessions, CRM has been developing a bear flag formation, which as the name indicates, usually resolves to the downside. A break below $164 just might have enough momentum to push the stock through the key $161 support area and toward the stock’s 200-day simple moving average, currently near $157.

Those long CRM should be aware of the bearish patterns in play, while more active traders may want to consider a short-side swing trade on a break below $164.

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