When reviewing ServiceNow (NOW) a month ago, we wrote, "NOW is at a fork in the road. Prices are close to making new highs for the move up and rallying closer to $200 but a Point and Figure chart makes a bearish case for now. Prices will ultimately take the path of least resistance."
With the benefit of hindsight we can see (first chart below) that NOW decided to move higher. We are still short of $200 but the pattern of higher lows and higher highs continued. The volume and momentum divergences also continued. Let's review our charts again and see what makes sense today.
In this daily bar chart of NOW, below, we can see that prices made new highs the past month. NOW tested the rising 50-day average line in the middle of May and is above the line now. The longer 200-day average line is still positive. The daily On-Balance-Volume (OBV) line has been stalled the last month and the last three months. From May to early June the 12-day price momentum study has weakened giving us a bearish divergence when compared to the price action.
In this weekly Japanese candle stick chart, below, we have a number of clues to point out. Prices are above the rising 40-week moving average line. The weekly candles show that gains above $180 are seeing some rejection with the upper shadow. We don't have a classic reversal pattern but we may have reached a new resistance zone. The weekly OBV line is not really diverging from the price action but it also is not as strong as it could be. The slow stochastic indicator shows a possible bearish setup with a lower peak versus March.
The Point and Figure chart of NOW, below, shows a price target of $222 but we need a new high of $187.86 to keep the bull going while a decline to $166.72 would be bearish.
Bottom line: NOW longs may want to raise stop protection to $165 or even book some profits as we have enough technical reasons to be cautious for the near term.