The move comes after a disappointing quarterly report.
Splunk’s third-quarter losses were worse than the same period a year ago, and also missed analysts’ expectations. Revenue sank 11% year over year, while also badly missing consensus expectations.
Even worse than a top- and bottom-line miss was a disappointing outlook, which management provided for its fourth quarter.
Wall Street isn’t reacting too kindly to the news, either. Splunk has already seen a number of downgrades and price target cuts since reporting. It's essentially the opposite outcome of CrowdStrike (CRWD) - Get Report.
Let’s look at the charts to see what levels are now key for this stock.
Bulls were not expecting such a violent move to the downside. Then again, if they were bullish, they likely weren’t expecting such a disappointing quarterly result, either.
The big level to watch now? $170.
This area was resistance in early 2020 before the coronavirus selloff knocked it lower. However, Splunk was able to break out over this mark in May, before holding it as key support in June and September.
You will even notice that the stock rallied toward this level on Thursday before being rejected by it.
In order for some traders to be long this name, they’ll need to see Splunk reclaim the $170 level. Below keeps it vulnerable.
Above $170 and bulls will turn their attention to the 200-day moving average near $177. Above that and perhaps last month’s low near $184 is in play.
If Splunk cannot reclaim $170, we have to keep our eyes focused on the downside. Specifically, the 21-month moving average and 100-week moving average come into play at $157 and $150.54, respectively.
Below the latter puts Splunk below Thursday’s low and should it close below both of these moving averages, it opens the stock up to more downside.
Does that put $140 in play? It could. There’s no telling where the bottom is at at this exact moment. Remember, this was a sub-$100 stock earlier this year. Let’s let price show us the way.