CRM Stock: Bearish Headwinds
I have expressed my bearish views on salesforce.com, inc. (NYSE:CRM) stock on numerous occasions, and many of my concerns have come to fruition. My bearish view was produced by analyzing the price action on the CRM stock chart.
Using past volume and price data to discern trends and forecast future prices is known as technical analysis, and this is the body of knowledge I employ to analyze investments and generate trading strategies.
The data from the price charts continues to suggest that a number of bearish tailwinds continue to swirl around CRM stock, and as a result, Salesforce stock continues to perform poorly in an environment where the broad market is hitting new highs and shattering records in the process.
In my previous report, I outlined two price levels that CRM stock could possibly test if bearish headwinds continued to persist. The first bearish price objective was $67.00, followed by $52.50. Shortly after that report was published, CRM stock fell from $74.33 to $66.43, reaffirming and adding merit to my bearish view.
The following Salesforce stock chart is where my bearish view first manifested.
Chart courtesy of StockCharts.com
The CRM stock chart above illustrates the uptrend that supports a price advance for four years before it was finally breached in January 2016. A break below that trend line indicated that the bullish trend toward higher prices ceased. The result of this break in trend caused CRM stock to sell off in dramatic fashion before it finally found some footing around $52.50.
After Salesforce stock found its footing, a rally ensued and took price back to test the uptrend line from below. This price action is referred as a backtest. It is not uncommon for the price to return to a previous level of support and backtest it. This is one of the routes that price will take to reaffirm a break of a trend. In some circles, traders to refer to the backtest as one last kiss goodbye before the new trend reasserts itself.
The following Salesforce stock chart illustrates the bearish price action that followed the backtest.
Chart courtesy of StockCharts.com
The CRM stock chart illustrates the levels of support and resistance that have now contained the price of Salesforce stock. As long as price is contained within these trend lines, a range bound type of trade is expected. The next trending move in price will depend on whether CRM stock can breakout though resistance or breakdown though support.
Bearish headwinds are suggesting that the latter is possible because CRM stock has had trouble sustaining a close above the 200-day moving average. The 200-day moving average is the dividing line between stocks trading in a bull market versus stocks trading in a bear market. When share price is above the moving average, it is bullish. When share price is below the moving average, it is bearish.
I have mentioned in my previous report that the inability to sustain a close above this level is bearish and even the positive earnings announcement in November that initially sent CRM stock soaring was unable to sustain a close above this level.
This bearish price action increases the possibility that support will be broken and my next price objective of $52.50 will be tested.
Bottom Line on CRM Stock
I am still bearish on Salesforce stock as the price action and signals continue to justify holding such a view. My bearish view on CRM stock has not come without its merits as the first price objective I outlined at $67.00 was attained.