Still Punishing Nonbelievers

Customer relationship management software provider (CRM) late last week announced upbeat second-quarter results, leading the stock to jump more than 12% on the day.

This trend-follower cult stock has won many battles with short-sellers over the years as it continues to surprise on the upside, leading to short squeezes and new long-only money piling into the stock.

For a little perspective, let’s look at the stock’s longer-term chart before weighing the near-term risk-reward.

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Once a rather overlooked stock as recently as late 2008, has, over the years, turned into a an absolute favorite stock among the trader community. This is particularly so as it continually rewards the buy-the-dip mentality that has once again gotten a good hold on investors.

Unlike other cult stocks — such as Apple (AAPL) during its first-half 2012 vertical leaps — CRM has found a good rhythm of consolidating and retracing its rallies before continuing higher. This does give Salesforce stock a better chance at continuing its uptrend without too catastrophic of a correction.

Note that with last week’s move, the stock has reached a new all-time high, as well as the very upper end of its trading range (black lines).

On the closer-up daily chart of, we note that last Friday’s move higher was the result of a powerful gap-up and out of a bullish pennant formation. The move was strong enough to gap the stock past the year-to-date highs, closing near the top end of the day’s range. Such powerful moves are not to be faded by my book, although from a pure trading point of view, I would now like to see some consolidation at these all-time highs before playing the stock from the long side.

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The bears have been dealt another devastating blow with last week’s rally, making the long-side of the stock still attractive, even if overbought in the immediate-term.

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free Weekly Market Outlook Video here. As of this writing, he did not hold a position in any of the aforementioned securities.

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