A sell-side firm initiated coverage of ServiceNow (NOW) with a buy or overweight recommendation with a $600 price target. In our April 22 review of NOW we recommended that "NOW could continue to bounce further in the short-run but with the big risk that we are looking at a large top pattern remains. I would stay on the sidelines." Let's check and see if anything has changed for the positive.
In this daily bar chart of NOW, below, we can see that prices continued to weaken after our April 22 review. Prices have recently started to show some stability and the indicators we favor are showing some green shoots. NOW is still in a downtrend and trades below the declining 50-day moving average line. The slope of the 200-day moving average line turned negative in early April.
The On-Balance-Volume (OBV) line declined from late December to the middle of April and now shows some stability. The 12-day price momentum study shows higher lows from January to April to May and gives us a bullish divergence when compared to the price action.
In this weekly Japanese candlestick chart of NOW, below, we can see some positive developments. Even though prices are still in a downtrend we can see that the two most recent weekly candles show lower shadows which tells us that traders have begun to reject the lows.
The weekly OBV line is still pointed lower while the slow stochastic indicator has signaled an oversold buy signal.
In this daily Point and Figure chart of NOW, below, we can see an upside price target in the $555 area.
In this weekly Point and Figure chart of NOW, below, we can see a downside price objective in the $217 area.
Bottom line strategy: Aggressive traders could probe the long side of NOW at current levels and increase purchases above $450. The $550 area is our price target for now. Risk a close below $401.
