Workday Inc. (WDAY​) soared more than 5% on Monday after Piper Jaffray raised its price target to $110 per share ahead of its first quarter financial results on June 1, 2017. The analyst cited channel checks showing momentum on large HCM deals and the “long anticipated signing of two notable financials deals in the quarter”, according to TheFly. Piper Jaffray maintains its overweight rating and views the upcoming earnings report as a potential catalyst.

Despite the confidence, investors have become increasingly concerned with the stock’s lofty valuation and lack of profitability. Some analyst like Citi have also cited increasing competition with Oracle Corp. (ORCL​) and SAP (SAP) within the HCM market, which could negatively impact profit margins as these companies jockey for market share. Still, the stock remains 44.8% higher so far this year following a swift turnaround in January.

On a technical level, the stock broke out from a long-term price channel dating back to early January, as well as its R2 resistance at $93.20. The move also marked a move higher from an earlier upper trend line dating back to mid-2016. The relative strength index (RSI) suggests that the stock may be overbought with a reading of 75.65, but the moving average convergence-divergence (MACD) has resumed its steady march higher.

Traders should watch to see if a bearish harami emerges in the aftermath of Monday’s strong move higher. If the move turns out to be a false breakout, the stock could move down to its R1 resistance at $90.30 or pivot point and 50-day moving average at around $85.24. But, a period of consolidation and/or a continued move higher could create a solid long-term support at around $93.30 and provide a great basis for a long position.

Charts courtesy of Author holds no position in the stock(s) mentioned except through passively-managed index funds.

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