Salesforce (CRM) on Wednesday said it would cut 8,000 jobs, or about 10% of its workforce. The customer relationship management software company also said it would close some offices in an attempt to boost profitability.
In a letter to employees, CEO Marc Benioff explained that customers "are taking a more measured approach to their purchasing decisions." The stock, which fell 47.83% last year, rose 3.7% on the news.
It's counterintuitive, but some investors believe the cuts are a sign that it's time to buy the San Francisco-based software company. Let's go to the charts to find out if that's true.
Right now, Salesforce faces two major hurdles. A bearish trend line (black dotted line) that has been in tact since late 2021 has capped the stock for over a year. Salesforce has also failed to close above its 200-day moving average (red) for over a year.
Chart Source: TradeStation
There is no way I'd purchase this stock as long as it remains below both of these hurdles. The 200-day moving average is trending lower, a bearish sign. If Salesforce can climb above both of these obstacles, I'd consider owning it.
What about other names in the software sector? Software giant Microsoft (MSFT) , which lost 28.69% last year, seems like an obvious candidate.
Chart Source: TradeStation
Unfortunately, Microsoft is plagued by the same technical issues that currently challenge Salesforce.com. The stock is trapped below its 200-day moving average (red), currently at $260. It's been nine months since Microsoft last closed above that key indicator.
Like Salesforce, Microsoft is trading beneath a key trend line (black dotted line) that has capped the stock for over a year.
On Wednesday, Microsoft fell 4.39% on a downgrade from UBS. The Swiss banking giant cited slowing growth in cloud services, as well as weaker sales in Microsoft's Office suite of products. I'd avoid the Seattle-based software giant until its technical picture improves.
Are there any good charts in the software sector? Yes, and it belongs to Oracle Corp. (ORCL) .
Chart Source: TradeStation
The Austin-based software giant has formed a "cup and handle" pattern. This bullish formation suggests Oracle could challenge its all-time high of $104 in the coming year.
Oracle is also trading above its 50-day (blue) and 200-day (red) moving averages, a bullish sign. On Wednesday, the stock closed at its highest level in nearly a year.
Notably, Oracle beat the major indexes and outperformed most of its peers last year, falling just 6.27%. With tech stocks in general and software in particular on the defensive, Oracle might be the best play in the software sector right now.
