CRM Stock Paints a Bullish Picture Supporting an Advance

CRM StockSalesforce Stock Is Trending Higher

salesforce.com, inc. (NYSE:CRM) is the cloud computing giant that struts itself as the “customer success platform” for your business. Salesforce instils the notion that its cloud computing products are the smarter and faster way to manage your business.

After walking through a number of their demos, there is no denying the powerful data analytics and services that their products provide. I can see why this company commands such a huge presence in the cloud computing landscape. The company’s claims are not unfounded, and it is a fundamental reason why CRM stock continues to flourish.

I have been watching this company for some time, and I have been on both sides of the fence with regards to my bullish and bearish views. The only thing that has remained constant is that my views on this investment are generated from the patterns and indicators that are generated on the Salesforce stock chart.

The style of investment analysis that I employ is called technical analysis. This method uses historical price and volume data to discern trends and forecast future prices. Because this method is so reliant on prices, it creates an environment where timely and disciplined investment strategies can be applied.

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There are clear and defined technical indications on the CRM price chart that support the notion that Salesforce stock is now setting its sights on higher prices.

The following Salesforce price chart illustrates the technical indicators that support the notion of a higher CRM share price.

salesforcesss2

Chart courtesy of StockCharts.com

There are two distinct indications on the CRM price chart, shown above, that support the notion that a higher Salesforce share price is a likely scenario.

The first indication that supports the notion of a higher Salesforce stock price comes from the bullish price action that is highlighted on the CRM price chart above. Bullish price action consists of impulse waves that advance price, and consolidation waves that unwind any overbought conditions and set up the next impulse wave. This wave structure creates the building blocks of a sustained trend.

In late January, the price of Salesforce shares exited the consolidation wave in an upward direction, via a breakout, indicating that the consolidation pattern was complete, and that a new advancing impulse wave was now set to develop.

For trading purposes, this wave structure is also very constructive in developing a timely and disciplined trading strategy because it also provides a potential price objective. The theory behind this constructive wave structure is that impulse waves that are separated by consolidation waves tend to mirror each other in terms of length.

Applying this theory to the wave structure in the above chart produces a potential price objective of $95.00 for the impulse wave that is now in development.

The second indication that supports the notion of higher CRM stock prices is from the bullish moving average convergence/divergence (MACD) cross that was generated in January of this year. The MACD indicator is a simple and effective momentum indicator that distinguishes between bearish and bullish momentum.

A bullish MACD cross suggests that bullish momentum has overwhelmed any bearish momentum and, as a result, the path of least resistance is toward higher prices. Under such circumstances, bullish price patterns tend to have a higher success rate.

The following stock chart illustrates the long-term trend that has defined the advance in Salesforce stock.

salesforce chart

Chart courtesy of StockCharts.com

An ascending channel has contained the price of Salesforce shares while the bullish trend continues its advance. This pattern is created by using two parallel upward sloping trend lines. One trend line acts as support, while the other trend line acts as resistance.

This channel creates an orderly environment where the price can oscillate between two trend lines. An orderly environment is the framework that allows a trend to become sustainable. As long as the price of CRM shares stay within the confines of these trend lines, the bullish trend remains intact.  There were a number of instances in which the price did briefly wander outside the confines of these trend lines, but both selling and buying pressure did not allow the price to remain outside these levels for very long.

The potential target price of $95.00 that is being suggested by the completion of the consolidation pattern coincides with resistance that is currently outlined by the level of resistance outlined by the ascending channel. This reinforces the notion that this bullish price objective is an attainable level because it fits.

Bottom Line on Salesforce Stock

I am bullish on the stock because there are multiple indications on the CRM stock chart that support the notion of higher prices. My view is strictly based on the patterns and indicators that were generated from the CRM price chart and, as long as these indications continue to support a bullish view, then—by default—my views will match.

If these indications begin to suggest that another view is warranted, then I will have no recourse but to change my view.