Salesforce's Earnings Dip - When to Buy It

Despite a decline Wednesday, the stock is setting up as a buy-the-dip opportunity.
Author:
Publish date:

Salesforce (CRM) - Get Report is slipping on Wednesday after reporting third-quarter results. But despite the fall the stock is setting up as a buy-the-dip opportunity.

Shares of Salesforce had been under pressure in the days leading up to its earnings report. Of course, it didn’t help that the stock market slumped on Monday and Tuesday as well.

In any regard, investors aren’t selling shares lower due to Salesforce’s top- and bottom-line beats. Instead, it was guidance that came up short. Management’s fourth-quarter revenue outlook narrowly topped consensus expectations but its earnings outlook came up short.

All of that has led to a mild correction in the share price, with the stock down about 3.5% on Wednesday.

For current investors, that’s a disappointing reaction. However, for those looking to add or to get long, it may have been exactly what they needed. Let’s take a closer look at the charts.

Salesforce is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells CRM? Learn more now.

Trading Salesforce Stock

Daily chart of Salesforce stock.

Daily chart of Salesforce stock. 

With Wednesday’s decline, the stock is declining into what should be a strong area of support. Between $153 and $155.30 is the 50-day, 100-day and 200-day moving averages.

Further, down near $152 is the backside of prior downtrend resistance (blue line). This mark was a significant level of resistance throughout 2019 and many bulls would like to see it hold as support should CRM stock fall that far.

The quarter wasn’t bad and while the guidance came up a bit short it was far from horrendous. I think that’s reflected in the stock's decline of only 3.5%. However, should we get a bit more weakness into this support zone, dip-buyers may consider it a worthy risk/reward.

On a rebound, see if CRM stock can reclaim $160; abbove it puts range resistance up near $166 back on the table.

Should the $152 to $155 support zone fail, it could usher in lower prices. That’s why being disciplined -- and cutting a long trade loose should support fail -- is imperative. For Salesforce stock, a break below $152 could send shares down to range support between $142 and $144.