Salesforce.com, Inc. (CRM) is a leader in cloud computing and is trading above my monthly pivot for May at $124.68. With a P/E ratio of 753.71, the stock is way overvalued for value investors and is becoming overbought even for momentum traders. The company is expected to report quarterly earnings results after the closing bell on May 29.
Salesforce stock closed Thursday at $126.05, up 23.3% year to date and up 23.3% in bull market territory since setting its 2018 low of $102.27 on Jan. 2. The stock set its all-time intraday high of $131.00 on May 14 and is down 3.8% since then. Analysts expect Salesforce to post earnings per share of 45 cents to 46 cents when it reports results on May 29. The company offers on-demand businesses applications in its cloud computing services. Competition is strong this quarter, which could have contributed to the warning reflected in the stock's slippage in price this week. (See also: How Salesforce CRM Works.)
The daily chart for Salesforce
Salesforce has been trading above a "golden cross" since March 3, 2017, when the stock closed at $82.22. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average and indicates that higher prices lie ahead. This bullish pattern has been a reason to have maintained a long position in this stock. The horizontal lines show that shares of Salesforce are well above my quarterly, annual and semiannual value levels of $107.63, $107.38 and $101.13, respectively, with this month's pivot at $124.68.
The weekly chart for Salesforce
The weekly chart for Salesforce is positive, with the stock above its five-week modified moving average of $122.90. The stock is well above its 200-week simple moving average at $80.13, which is also known as the "reversion to the mean," last tested during the week of Feb. 12, 2016, when the average was $52.49. Buying the stock on weakness to the "reversion to the mean" was thus a prudent longer-term investment strategy. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 77.79 this week, up from 73.91 on May 11.
Given these charts and analysis, my trading strategy is to buy Salesforce shares on weakness to my quarterly and annual value levels of $107.63 and $107.38, respectively. I do not have a risky level, but my monthly pivot of $124.68 is a key level for the shares to hold on weakness. (For more, see: 8 Stocks to Thrive as 2018 Cloud Spending Soars.)