![The charts suggest Salesforce could face more trouble in the short term before bottoming out](https://news7g.com/wp-content/uploads/2024/05/107379695-1709134286874-gettyimages-1934086255-DAVOS_WEF_2024-780x470.jpeg)
Salesforce.com (CRM) shares plunged this week after its earnings report, pushing the technology name below its 200-day moving average for the first time since its October 2023 low. Charts What to say after this sudden 20% discount? Unfortunately for CRM, we see further downside before the potential buying opportunity presents itself. Let’s set the stage for this discussion by analyzing the conditions leading up to this week’s earnings report. After hitting a new all-time high around $318 in early March, Salesforce showed volatile, sideways price action in mid-April. The gap lower pushed CRM below its 50 moving average. days, often serving as an early warning sign of an impending trend change. From mid-April until this week, Salesforce continued to offer flat prices, this time from $268 to $290. Notice how in mid-May the price finally “closed the gap” and retested the $290 level? The move also goes against the descending 50-day moving average, which is acting as a drag pushing the price back to short-term support around $268. Momentum features are also fading, with the Relative Strength Index not quite reaching the 60 level during the mid-May rally. When a stock is in a confirmed downtrend, the RSI usually has struggled to break above 60 during counter-trend rallies, so Salesforce appears to have shown all the signs of a confirmed downtrend period. While CRM is in a somewhat precarious position this week, the gap lower after earnings represents a sudden reassessment for the former tech leader. How do we understand the technical configuration after a sudden change in chart characteristics? Using the Fibonacci retracement, you’ll see that Thursday’s opening level around $222 is almost exactly the 50% retracement of the December 2022 to March 2023 bull run. So now We now have a new price anchor to evaluate the overall character of the chart, because any close below that 50% line would represent additional weakness. And until and unless CRM can push back above that 50% retracement level, the dominant trend will be bearish. Is $200 the bottom? With the negative price action taking place this week, highlighted by Thursday’s gap lower, we expect the price to continue falling to the 61.8% Fibonacci level around $200. Look to the left and you’ll see that this coincides almost perfectly with the lows from August, September and October 2023. This “confluence of support” gives us a target potential price cuts and hinted at more trouble to come before Salesforce could possibly turn things around from a technical perspective. While we now have a reasonable downside target, it is important to look for signs of accumulation in the form of improving near-term technical patterns. CRM is currently in a clear downtrend pattern with lower highs and lower lows. We would need a higher low, representing an influx of buying, to suggest any deviation from the current downtrend phase. Until then, here’s a chart showing all the signs of further recession ahead. -David Keller, CMT marketmisbehavior.com DISCLOSURE: (None) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT RELATE TO FINANCIAL, INVESTMENT, TAX OR LEGAL OR A RECOMMENDATION TO PURCHASE ANY SECURITIES OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL AND DOES NOT RESPONSE TO ANY INDIVIDUAL’S UNIQUE CIRCUMSTANCES. THE ABOVE CONTENT MAY NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for full disclaimer.