I wrote about Salesforce.com (CRM) in the middle of August, where I said, "CRM has rewarded patient investors the past two years. Some weakness has appeared on our indicators and a downside price target on the Point and Figure chart that could mean a test of the 200-day moving average line in the weeks ahead. A close below the late July low around $135 will weaken the picture."
With the benefit of hindsight I can see that CRM traded sideways for about a week and then broke out to a new high. Unfortunately technical analysis is a wind-sock and not a crystal ball. Some of the weakness in the indicators has reversed to strength.
(For more on CRM, see Jim Cramer: These 4 Stellar Stocks Are No Longer Rangebound.)
Let's check out the charts and indicators again to see if we should follow this current move to the upside.
In this daily bar chart of CRM, below, we can see the new high for the move up. CRM is above the rising 50-day moving average line as well as the bullish 200-day line.
The daily On-Balance-Volume (OBV) has been steady to positive this month and is very close to making a new high to confirm the new price high.
The daily Moving Average Convergence Divergence (MACD) oscillator has just turned upwards to a fresh outright go long signal.
All very positive.
In this weekly bar chart of CRM, below, our price based indicators are bullish again but the volume driven indicators have yet to confirm. CRM is above the rising 40-week moving average line.
The weekly MACD oscillator had narrowed towards a potential take profits sell signal but the price strength turned the two moving averages back to the upside and in favor of the bulls again.
The weekly OBV line shows softness in July and early August and would need to move up to a new high to be in line with the price driven indicators.
In this Point and Figure chart of CRM, below, we can see the breakout to the upside and a new bullish price target of $188.98.
Bottom line strategy: With the new price high on CRM the $150-$145 area should now become support and longs should risk below $140. CRM could trade in the $155-$150 area for a week or so before trending higher. Trade CRM from the long side risking below $140 looking for a rally to the $190-$200 area in the months ahead.