Salesforce Stock Chart: Is It A Buy After A 50% Drop?

Salesforce Actions (RCMP) – Get the report from Salesforce, Inc. when last checked, the double-digit percentage was higher on June 1 after the customer relationship management software icon reported earnings after the May 31 close.

Given the horrendous trading in tech stocks this year — at one point the Nasdaq was down more than 30% from its peak — bulls breathe a sigh of relief with Salesforce’s stock.

Salesforce was no exception to the massive sale. Shares have halved in five months, a drop that many investors say is unwarranted. They are right.

When the company previously released its results on March 1, it reported net revenue and profit and raised its guidance for the first quarter and full year. Shares rebounded less than 1% the day after the report and fell 27% to last week’s low.

We now have a similar report this week, with the company posting a higher and lower pace and boosting its operating margin forecast.

In other words, it was a solid report. As Chairman and Co-CEO Marc Benioff said, “I can tell you that our business – you can see that in the first quarter numbers, can’t you – is incredibly healthy.”

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Salesforce stock weekly chart.

Salesforce had a tough time as it fell below $200. It fell in six out of seven weeks and then found clear support near $155. In three consecutive weeks, the title has reached a low in this area. In consecutive weeks, it even had the same weekly low: $154.55.

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This consolidation led to Tuesday’s earnings report, where support was either going to be retested and potentially broken, or it was going to be solidified.

With Wednesday’s rally, support solidified. Should Salesforce stock come under pressure, we know which area to keep an eye on – $155.

Now that it is moving higher, the stock is grappling with an area it once struggled with. The $185 area was support near the February low but resistance in late April and early May.

Today’s high is $184.42, so clearly this area remains notable even as Salesforce stock moves above the 10-week moving average.

If it can sustain its momentum and clear $185, the bulls will likely turn their attention to the $195 area.

There the stock finds its 21 and 200 week moving averages. If it can clear all of those metrics and hold above $200, then $220 could be in play.

While such a rally is impressive, investors should keep in mind just how much this stock – and many of its peers – have corrected over the past few months.

At one point it is due to a sustained rally.

Karen J. Nelson