Splunk (SPLK) is due to report its latest quarterly numbers after the close of trading Wednesday. We reviewed the charts of SPLK on March 12 and wrote that "There has been some slowing in the decline of the price of SPLK but overall the charts of SPLK look bearish. Continue to avoid the long side."
Let's check and see if things have improved or remain bearish for this software platform that searches and analyzes machine-generated data.
In this daily bar chart of SPLK, below, we can see that prices have declined from early September. Prices have fallen around $100 or so from their zenith. SPLK is trading below the declining 200-day moving average line and below the bottoming 50-day line. The daily On-Balance-Volume (OBV) line has been in a decline from early December but shows some stability in May.
The 12-day price momentum study in the lower panel shows a higher low from March to May. This is a bullish divergence when compared to prices making lower lows. This divergence tells us that the pace of decline has slowed and that there appears to be scale-down buying of SPLK.
In this weekly Japanese candlestick chart of SPLK, below, we see a mixed to improving picture. Prices are in a downtrend below the declining 40-week moving average line. There were two lower shadows in early May as traders rejected those prices. The weekly OBV line is still in a downtrend but an uptick in early May could be the start of a reversal. The MACD oscillator has narrowed and is close to a cover shorts buy signal.
In this daily Point and Figure chart of SPLK, below, we can see a potential price target of $141.
In this weekly Point and Figure chart of SPLK, below, we can see that prices reached their bearish target of $129. Technically oriented traders may have used this price target to cover shorts.
Bottom line strategy: I have no special knowledge of Splunk's earnings figures. Aggressive traders could go long SPLK today ahead of the numbers because the charts and indicators suggest a good bounce to the upside. Risk to $111.
