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How to Trade Workday at Record Highs

Workday has traded incredibly well this week and is now hitting new all-time highs following earnings. Here's a look at the stock.

A few strong days of gains ahead of earnings weren’t enough to keep Workday  (WDAY) - Get Workday, Inc. (WDAY) Report down on Friday. Shares have risen about 12% on the day, following better-than-expected quarterly results.

The strength in the cloud group cannot be denied at this time. Salesforce  (CRM) - Get, inc. Report and Anaplan  (PLAN) - Get Anaplan, Inc. Report kicked things off earlier this week with strong results.

That got the whole industry moving higher, as one may notice on the charts below.

Despite putting together a two-day rally of more than 11% to new all-time highs, Workday delivered on Thursday after the close of trading. The company beat on earnings and revenue expectations, while also raising guidance.

The quarter was obviously enough to spark shares higher, but where might they go from here? Let’s look at the charts.

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Trading Workday Stock

Daily chart of Workday stock.

Daily chart of Workday stock.

It’s been a long road to recovery for Workday. Shares finally came up and tested the February in early July. However, shares were rejected from this level and fell into a downtrend lasting more than a month.

However, in mid-August, shares broke out over downtrend resistance (blue line), before consolidating and breaking out over $200 resistance. That second breakout was fueled by the earnings reports from others in the industry earlier this week.

It would have been perfectly natural for shares to have a muted reaction or even pull back on Friday following Workday’s results. However, it gapped even higher and is now holding the 138.2% extension as support. 

Also, take a second and observe the robust volume the stock has seen over the last three trading days. That's quite impressive for the bulls. 

From here, traders will be looking for Workday stock to continue holding the 138.2% extension. If it does, look for eventual push up to the 161.8% extension at $260.25.

Should shares close below $238, it’s possible we see a gap-fill attempt down toward $220 and/or a pullback to the 10-day moving average. Neither would be all that unhealthy at this point, but let’s keep an open mind to the potential price action moving forward.