Salesforce.com, Inc. (CRM) surpassed profit expectations for the 13th consecutive quarter on May 28. The stock reached a high of $184.80 that day before falling to $167 on June 5. Salesforce stock is now trading between its annual pivot point of $167.49 and its quarterly and monthly pivot points of $181.82 and $182.72, respectively.
The stock finished at $174.56 on Tuesday, June 9, up 7.3% year to date and 51.4% above its March 18 low of $115.29. Salesforce stock is likewise in correction territory, having fallen 10.8% from its all-time intraday high of $195.72 on February 20. Salesforce does not come cheap, with a P/E ratio of 214.67 and no dividend, according to Macrotrends. This is not a stock for value investors.
The daily chart for Salesforce
Salesforce’s daily chart reveals that the stock drifted sideways around its 200-day simple moving average until December 20. The stock then recovered momentum, eventually reaching an all-time high of $195.72 on February 20.
Salesforce stock rose over its semiannual pivot of $163.17 as 2020 started, and its annual pivot was pierced and maintained on Jan. 6. This was a second cause for the stock to reach a high on February 20.
The price subsequently plummeted 41% to a low of $115.29 on March 18. Salesforce dipped below its 50-day simple moving average on February 26, maintained its semiannual pivot at $163.17 on February 28, but failed to maintain this level on March 6.
Failure to sustain its 200-day simple moving average on March 11 resulted in a low of $115.29 on March 18. On April 17, the stock rebounded to its 200-day simple moving average. On May 7, the stock re-entered the semiannual and annual pivot levels of $163.17 and $167.49, respectively. Since May 7, the trading range has been between $167.49/$163.17 and $181.82/$182.72.
The weekly chart for Salesforce
Salesforce’s weekly chart is bullish, with the stock trading above its five-week modified moving average of $171.00. At $125.90, the stock is far above its 200-week simple moving average, or reversion to the mean.
The weekly slow stochastic value of 12 x 3 x 3 is expected to grow to 79.99 this week, up from 76.33 on June 5. This value was over 90.00 during the week of January 31 in an expanding parabolic bubble formation. Bubbles usually always burst, and this one burst at the March 18 low.
Trading strategy: Buy Salesforce stock when it falls below its annual and semiannual pivots of $167.49 and $163.17, respectively. Reduce holdings based on strength to quarterly and monthly pivots of $181.82 and $182.72, respectively.
How to apply my risky and value levels: My proprietary analyses used the stock’s closing price on December 31, 2019. The semiannual and annual levels are still visible on the graphs. In these time periods, the last nine closures are used in each calculation.
The second quarter 2020 level was determined using the March 31 close, while the monthly level for June was determined using the May 29 close. Each week, new weekly levels are determined, and each quarter, new quarterly levels are calculated. Semiannual levels are adjusted in the middle of the year, while annual levels remain in effect all year.
My hypothesis is that nine years of volatility between closing is sufficient to infer that the stock has factored in all probable bullish and negative occurrences. Investors should purchase shares on weakness to a value level and sell shares on strength to a risky level to capture share price volatility. A pivot is a value or danger level that has been breached within its time period. Pivots operate as magnets that are likely to be tried again before their time horizon ends.
How to utilize 12 x 3 x 3 weekly slow stochastic readings:I chose 12 x 3 x 3 weekly slow stochastic readings after backtesting numerous techniques of measuring share-price momentum with the goal of finding the combination that produced the fewest false signals. I did this after the 1987 stock market meltdown, and I’ve been pleased with the results for more than 30 years.
The stochastic reading for the stock encompasses the previous 12 weeks of highs, lows, and closes. A raw assessment of the disparities between the highest high and lowest low vs the closing is available. These levels are tweaked to allow both quick and slow reading, and I discovered that slow reading worked best for me.
The stochastic reading spans from 00.00 to 100.00, with values over 80.00 considered overbought and those below 20.00 considered oversold. A result over 90.00 indicates the creation of a “inflating parabolic bubble,” which is often followed by a 10% to 20% decrease over the following three to five months. A score of less than 10.00 is regarded “too inexpensive to ignore,” and is usually followed by 10% to 20% increases over the following three to five months.
The author has no holdings in any of the stocks mentioned and has no intentions to start new positions in the next 72 hours.
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