Shares of Salesforce.com, Inc. (NYSE:CRM) have tracked higher year-to-date alongside the broader stock market.
While CRM stock remains constructively positioned through the intermediate to longer-term lens, in the near-term, it has reached better technical resistance that must be respected until cleared.
When I last discussed shares of Salesforce.com on Oct. 7, 2016, I pointed to the near-term weakness in the stock at the time lining up with multiyear technical support.
I said the bullish reversal from Oct. 5-6 pointed toward a next upside target at $76, followed by $80.
Over the ensuing weeks, both upside targets were reach, and the trade had run its course.
CRM Stock Charts
Looking at the weekly chart below, CRM stock — viewed through a multiyear lens — very much qualifies as a “trend following” stock. In other words, it’s a stock that over the years has trended higher in a very orderly and well-defined channel.
I often repeat to my direct members and clients: Trend following can be one of the most rewarding trading and investing strategies if one learns to focus on those stocks or assets that offer the most well defined trends. The choppier a trend is, the more challenging investors find it to stick with the trend over time.
Salesforce stock over the years has offered traders and investors a notably well-defined trend that allowed for reduction of risk at the top end of the trading range, and addition of risk near the lower end of the trend.
As such, the lows in CRM stock from the fourth quarter of 2016 coincided with the lower end of the multiyear uptrending channel, which I marked with the two parallels. So far in 2017, Salesforce has strung together an almost creepy orderly rally with just about no volatility.
This orderly push higher through a multiyear lens, and from a trend following perspective, ultimately should have higher to go still — namely toward the upper end of the multi-year channel.
However, note that CRM shares, for the time being, have reached critical horizontal resistance in the low $80s, which matches up with the 2015 and 2016 highs.
On the daily chart, we see that the lows in CRM stock from Q4 2016 in the high $60s formed an important higher low versus the early 2016 lows. Those lows also matched up with a nearly exact 50% retracement of the entire rally from the February 2016 lows in to the May 2016 highs.
This paints a constructive backdrop. However, I believe the year-to-date rally right now, to stand a better chance of sustainably overcoming horizontal resistance in the low $80s, might need a bit more consolidation.
My specific target? A solid daily close above $84.50 would signal that CRM stock is ready to push higher into the high $80s or low $90s, which marks the upper end of the multiyear uptrending channel.
– Serge Berger
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Source: Investor Place