Salesforce.com, Inc. (NYSE: CRM) seems to be getting ready for a price bump in the short-term as per the latest charts. Salesforce.com, Inc. is an American cloud-based software company that provides customer relationship management service and a complementary suite of enterprise applications focused on customer service, marketing automation, analytics, and application development.
Bullish Move – Chart Indications
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock has been forming a downtrend channel during the past several months. This is marked in orange color. The stock had typically taken support at the bottom of the channel before bouncing back. The stock has currently broken out of the downtrend channel, indicating possible bullishness.
CRM – Daily Chart
#2 Price above MAs: The stock is currently above the 50-day as well as 200-day SMA, indicating that the bulls currently have an upper hand.
#3 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) line is currently above the (-DI) line, and the ADX line has started to move higher from below the +DI and -DI lines.
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#6 Flag Pattern Breakout: As you can see from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern and is marked in the chart in purple color. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern, indicating possible bullishness.
CRM – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#8 Bullish MACD: In the weekly chart as well, the MACD line is above the MACD signal line, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for CRM is if it corrects to the price of $270.00. This is marked as a green color dotted line in the daily chart.
Alternatively, you can purchase the shares of CRM above Friday’s high, which translates to a price of around $286.50.
TP: Our target prices are $300 and $320 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $254.00 (for entry near $270.00) and $278.00 (for entry near $286.50). Note that the stop loss is on a closing basis.
Our target potential upside is 5% to 19% in the next 3-6 months.
- Entry near $270.00: For a risk of $16.00, our first target reward is $30.00 and the second target reward is $50.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $286.50: For a risk of $8.50, our first target reward is $13.50 and the second target reward is $33.50. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the channel breakout level with high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara
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