SalesforceLong
HUGE bull flag on Salesforce
Updated
Salesforce, ticker symbol CRM, is down over 20% from its all time high of $276 back in September, now trading at $222. It had experienced an almost 150% run up from its March lows of $132.
On the 1st of December, Salesforce announced it was acquiring Slack, ticker symbol WORK, for $28 billion in which its CEO described the deal as a ‘match made in heaven’. Since the announcement, the price gapped down 8%. Despite the deal having a $28 billion valuation cost, Saleforce has lost $36 billion in valuation because of it. An overreaction, maybe?
Technically, CRM is in a massive bull flag. Bull flags are found in stocks with massive uptrends. It is called a flag as the pattern of consolidation looks like a flag, after a vertical rise in the stock, which looks like a pole. The psychology behind the pattern is that the stock does not fall steeply, instead bulls buy the dips as the stock prints lower, creating the pattern.
CRM is also just above a $220 support level, which it tested and rejected in 6 of the previous 9 trading days – the other 3 days closed above it. Price is also being supported by an upward trend line connecting the March low and the low of the 2nd December, the first trading day after the Slack acquisition announcement.
Price has also filled the gap created by the monster earnings announced on 24th August which caused the stock to sky rocket 25%.
If the price bounces of this trend line and the bottom of the parallel channel to the top of the channel, this would represent up to 15% upside. If the price was to break this channel and continue to retest all time highs, this would be 28% upside
On the 1st of December, Salesforce announced it was acquiring Slack, ticker symbol WORK, for $28 billion in which its CEO described the deal as a ‘match made in heaven’. Since the announcement, the price gapped down 8%. Despite the deal having a $28 billion valuation cost, Saleforce has lost $36 billion in valuation because of it. An overreaction, maybe?
Technically, CRM is in a massive bull flag. Bull flags are found in stocks with massive uptrends. It is called a flag as the pattern of consolidation looks like a flag, after a vertical rise in the stock, which looks like a pole. The psychology behind the pattern is that the stock does not fall steeply, instead bulls buy the dips as the stock prints lower, creating the pattern.
CRM is also just above a $220 support level, which it tested and rejected in 6 of the previous 9 trading days – the other 3 days closed above it. Price is also being supported by an upward trend line connecting the March low and the low of the 2nd December, the first trading day after the Slack acquisition announcement.
Price has also filled the gap created by the monster earnings announced on 24th August which caused the stock to sky rocket 25%.
If the price bounces of this trend line and the bottom of the parallel channel to the top of the channel, this would represent up to 15% upside. If the price was to break this channel and continue to retest all time highs, this would be 28% upside
Note
Some positive news that may help Salesforce push higher:Bank of America reinstated Salesforce as buy and named it a top pick. It said today that “We are reinstating coverage on Salesforce.com with a Buy rating and $275 PO, and view it as a top pick. Salesforce screens well in our 4M’s framework for software investing - Market, competitive Moat, Management strength and Margin potential.”
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