Splunk Is Getting Attention, but Does It Have the Tools for More Upside?

The company is attracting interest from a private equity firm and an analyst upgrade.

We just looked at Splunk (SPLK) on Thursday and wrote that, "SPLK is higher on the day but off its best levels, which is an early indication that prices are not likely to have much carryover buying from here. SPLK really needs a bigger base pattern to generate a sustained move higher. There are more attractive looking stocks."

Since that review we have learned that a private equity firm has taken a significant stake in the company and a sell-side firm has upgraded its opinion of the software company.

Let's check the charts again.

In this updated daily bar chart of SPLK, below, we can see that the shares closed in the middle of their high/low range Thursday and continued higher this Friday. SPLK has traded closer to the underside of the bottoming 200-day moving average line.

The On-Balance-Volume (OBV) line is still in a sideways pattern. The Moving Average Convergence Divergence (MACD) oscillator continues to hug the zero line telling us that the strength of the trend has not yet improved.

 

In this weekly Japanese candlestick chart of SPLK, below, we only have one more candle than Thursday. The latest candle is currently showing an upper shadow and a lower shadow for a balanced situation. The trading session is not over yet but so far this is not encouraging.

 

 

In this daily Point and Figure chart of SPLK, below, we can see a potential upside price target in the $168 area.

 

 

 

Bottom-line strategy: Increased interest from a deep-pocketed investor and a fundamental upgrade help but they are imprecise timing tools. I will continue to wait for more base building before recommending the long side of SPLK.

 

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