Shares have soared more than 9%, reaching a 52-week high of $84.48 Thursday. The cloud software company delivered better-than-expected earnings. Shares are currently trading at $83.80. So taking profits now is the wise move.
Salesforce shares closed Friday at $83.77, up 0.6%. The shares are now up 6.7% year to date against a 2.7% rise in the S&P 500 (SPX) index. The stock can march higher, given its upbeat revenue outlook but near its 52-week high CRM is no longer a bargain.
Technically, the risk-versus-reward now points to the downside in the near term, as seen in the chart from TradingView.
The two blue arrows above show the range the stock has traded in since the end of March, following a sharp rebound of almost 40% from the February lows. Since then the shares have consolidated by trading near the 100-day average of $72. You can see the manner in which, during that span, the yellow line has moved sideways in an almost flatline manner.
But with the stock now 7% above its 20-day period (blue line), a retest of the support area at around $78.90 (solid red line), or 6% lower, is almost inevitable. Not only will that move fill 50% of the 4% gap created on the earnings announcement, it will need to confirm whether the stock, which is now near all-time highs, can continue to move higher.
Until then, the stock will likely trade sideways to slightly down. The next buy point is not until $87.80.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.