Shares of ServiceNow (NOW) are slumping lower on the company's dismal guidance, according to reports Thursday. Let's look closer at the charts and indicators to see if the risk is to the downside or whether there is opportunity on the upside.
In the daily bar chart of NOW, below, we can see that the shares have been finding buying interest (support) in the $420-$400 area the past three months. Prices managed two rallies above the 50-day moving average line in June and early July but recently a bounce stopped at the underside of the 50-day line.
The On-Balance-Volume (OBV) line made a new low in July to continue the lengthy downward trend and tell us that sellers of NOW have been more aggressive than buyers for months now. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line and pointed lower - not a good recipe for a rally.
In the weekly Japanese candlestick chart of NOW, below, we can see a difference between eastern techniques like candlesticks and western techniques like the OBV line. The candlesticks show us a number of lower shadows telling us that traders are rejecting the lows. The slope of the 40-week moving average line remains pointed lower.
The OBV line has weakened from October and shows only a very minor uptick in July. The MACD oscillator is struggling to improve.
In this daily Point and Figure chart of NOW, below, we can see a potential downside price target in the $373 area.
In this second Point and Figure chart of NOW, below, we used weekly price data. Here the software suggests a downside target in the $212 area.
Bottom-line strategy: Thinking about the four charts of NOW, above, I see them as a collection of perspectives -- there are positive clues and bearish price targets. The past three months could be a descending triangle formation and that would mean a downside price break could happen in the weeks ahead. The best course ahead is to avoid the long side of NOW.
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