Editor’s note: Today, we’re handing the reins to colleague Larry Benedict – a market wizard and legendary hedge fund manager.

He’ll explain what’s next for a $300 billion giant that’s rallied nearly 90% since its December 2022 lows…

Here’s Larry…

---

After a near-90% rally from its December 2022 low, Salesforce (CRM) consolidated from July through October 2023.

The customer relationship management giant’s rally resumed when the broader market took off again in November.

From its October low to its all-time high in February, CRM rallied 64%. That move saw its market cap top out at over $300 billion.

But after peaking in February, CRM has drifted. Momentum progressively dwindled.

So now CRM is testing multiple important levels. Let’s check what could happen next…

Three Phases

In the chart below, the 50-day Moving Average (MA, blue line) shows three main movements.

First, we see the rally up to its short-term peak in July (‘A’). Second, CRM retraced through October. And third, there’s the rally that resumed in late October and took CRM up to its all-time high (‘B’).

Salesforce (CRM)

Source: eSignal

As the chart shows, both rally phases coincided with bullish signals:

1. The 10-day MA (red line) crossed above the 50-day MA with both MAs trending higher. (The rally up to ‘B’ was stronger than the rally up to ‘A.’ We see that in the steeper angle of the MAs.)

2. The Relative Strength Index (RSI) moved in the upper half of its range (above the green line). That showed CRM’s positive momentum.

Additionally, the rally phase from late October occurred as the blue MACD line crossed above the orange Signal line. Both then rallied strongly from below the zero (0.00) line.

During CRM’s rally, though, we see a growing divergence between the CRM stock price (upper orange line) and the RSI (lower orange line).

CRM rallied through March 1. But the RSI peaked back in early December and steadily trended lower.

And since early this year, the RSI has repeatedly tested support throughout its downtrend.

That support level held until late March. But it has increasingly come under pressure – and it recently broke below support.

This continued decline in momentum has pulled CRM down from its March 1 peak. And now it is facing further pressure.

There has been a sustained period of the 10-day MA bullishly tracking above the 50-day MA (since November 2023). Yet these two MAs have been converging since March. And it looks likely that they’ll soon cross over.

So with all these signals in mind, I’ll be watching several things from here…

An Emerging Down Move

As we noted, the RSI recently broke below support. So what happens now is crucial to where CRM is heading next.

If the RSI extends further into its lower band and stays there, that will pull CRM further below the $300 level.

A prolonged stay in the RSI’s lower half could see CRM test the $275 level next.

I’ll also pay attention to the MACD. As the chart shows, it peaked back in December and is now testing the zero line.

If the MACD line continues to pull the Signal line into its lower half, that will add further weight to any down move.

In the long term, we’d then look for the 10-day MA to cross beneath the 50-day MA and keep tracking lower as evidence of a bigger down move.

Regards,

Larry Benedict
Editor, Trading With Larry Benedict