ServiceNow Inc. (NOW) is soaring today. Way back in early September we said "NOW needs to see a new high in the OBV line but aside from that obstacle the charts are bullish. $240 area is our next potential price target." With NOW trading around $225 today a fresh look at the charts is in order. For his final "Executive Decision" segment, Cramer spoke to John Donahoe, president and CEO of ServiceNow, a company at the forefront of the enterprise digital transformation.
In this daily bar chart of NOW, below, we can see there was aggressive buying of NOW from October and new highs in the daily On-Balance-Volume (OBV) line foreshadowed today's price strength. Notice how NOW traded lower in October and November but the OBV line held very steady? Traders and investors stayed with their positions as prices declined. Prices made higher lows from November to December and the OBV line moved up to a new high in December. The OBV line continued higher in January even as NOW traded sideways. Today NOW gapped higher on heavy volume or turnover. Prides are firmly above the rising 50-day moving average line and the bullish 200-day moving average line. The Moving Average Convergence divergence (MACD) oscillator has been improving from late November and earlier this month it crossed the zero line for an outright go long signal.
In this weekly bar chart of NOW, below, we can see a bullish setup without today's price action. Prices are above the rising 40-week moving average line. The weekly OBV line has been basing the past two months and the weekly MACD oscillator crossed to the upside early this month for an outright buy signal.
In this Point and Figure chart of NOW, below, we can see the big rally of today with no gaps. The rally above $195.49 was a big breakout and open the way for a possible longer-term price target of $313.39 after we see our earlier $240 price target.
Bottom line strategy: NOW needs to trade sideways a bit to catch its breath from today's sprint to the upside. Traders should use this anticipated sideways price action to nibble from the long side to round out your long position. Risk a close below $200 now. First target is $240-$250.