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Salesforce Earnings Preview: Must-Know Setup Before the Report

Salesforce stock rallied hard on Monday, but the big move could come after the earnings report Tuesday. Here are the key levels to know now.

Salesforce  (CRM) - Get, inc. Report is due to report earnings after the close on Tuesday.

The stock rallied 4.4% on Monday. Before that, the stock was down about 9% from the all-time highs made earlier in the month.

Until the recent pullback — which included three straight weekly declines for Salesforce stock — the shares had been doing pretty well.

From its prior earnings report on Aug. 25 to the recent high, the San Francisco customer-relationship-management-software major's shares had climbed 19.5%.

Salesforce in late September again raised its guidance

This year the stock is up about 20%. That lags both the Nasdaq and the S&P 500, as well as many of its tech-related peers.

For instance, it’s below Nvidia  (NVDA) - Get NVIDIA Corporation Report, Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report and Tesla  (TSLA) - Get Tesla Inc Report, as well as all the FAANG components with the exception of Amazon  (AMZN) - Get, Inc. Report.

So the bulls want to know: Can Salesforce play catchup on its earnings report?

Looking for New Highs on Earnings

Daily chart of Salesforce stock.

Daily chart of Salesforce stock.

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Bulls have their eye on one main level as Salesforce stock approaches earnings. That level is the current all-time high at $311.75.

You’ll notice at the recent low that the stock found support from the prior all-time high at $284.50. It’s also worth pointing out that this level was resistance in September.

In other words, it’s significant, and if we get a bearish post-earnings reaction, the $282 to $285 area will be critical.

A break of this zone and a push below $280 could put the prior resistance zone between $266 and $270 on the table. Of course, that’s provided that the 21-week moving average doesn’t buoy the stock price.

If Salesforce really delivers a disappointing quarter, the gap-fill level down near $260 could eventually be on the table.

On the flip side, I want to see a move back over the $300 level and the 21-day moving average.

That would put the bulls back in control of the stock and keep the highs in play near $312.

It’s the move over $312 that opens the door to significantly more upside. Specifically, I will still have the 161.8% extension on my radar, up near $335.

To get there would require Salesforce to rally about 13% from Monday’s close. But if the report is strong enough and the overall market holds up, this isn’t an unrealistic target.