Salesforce (CRM) felt the full brunt of the tech selldown last year.
It peaked in November 2021 at around $312. But the customer relationship management (CRM) giant was trading at just $126 by December last year. That’s a massive 60% drop in 13 months.
Yet CRM began to rally coming into the start of this year…
That rally continued until late May, and it hit a near-80% gain from those December lows.
But CRM is now consolidating into a triangle pattern.
So today I want to check out what’s in store from here…
A Consolidating Pattern
The left side of the chart below shows the tail of CRM’s 60% peak-to-trough fall…
Although we can’t fully see it in the chart, our momentum indicator, the Relative Strength Index (RSI), tracked mainly in the bottom half of its range during that fall.
That’s a bearish signal.
Salesforce (CRM)
Source: e-Signal
CRM built a base in December, though. And the RSI rose (red line) from near oversold territory (lower grey dashed line).
CRM’s rally began to develop as we rolled into 2023. And it showed two bullish signals…
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The RSI broke through resistance (green line) and gained a firm hold in the upper half of its range. The RSI has remained there throughout CRM’s rally.
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The 10-day Moving Average (MA, red line) broke above the longer-term 50-day MA (blue line). And both tracked higher.
Within that uptrend, the gap higher at the start of March happened when CRM released strong Q4 and Full Year (FY) earnings.
But after that spike, CRM drifted lower and almost filled in the gap before starting to rally again.
That rally then accelerated through CRM’s Q1 earnings on May 31.
CRM gapped lower this time (albeit slightly) despite upbeat results and reiterated guidance of around 10% growth for FY 2024.
Since then, CRM’s rally has stalled. Take another look:
Salesforce (CRM)
Source: e-Signal
It is now consolidating into a sideways triangle pattern (orange lines)… and the two MAs are converging.
As the chart shows, the RSI has been peppering – and so far holding – support (red circle).
What happens around this level will be critical for CRM’s next move…
So what am I looking for around here?
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Testing Support
As we saw recently when we checked out Netflix (NFLX), a stock breaking out of a triangle can move strongly in either direction.
We need to watch momentum to see what direction that will be.
If the RSI can hold support and start tracking higher in the upper half of its range, then that increases the odds that CRM’s next breakout move will be higher.
But there are no guarantees.
If the RSI breaks down through support, CRM could soon test the $200 level.
The 10-day MA crossing below the 50-day MA would then set up CRM for a bigger leg down.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
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Mailbag
Which way do you think Salesforce will break out of its triangle pattern? Write in to [email protected].