Salesforce.com Momentum Has Slowed -- Stay Alert

In an "Executive Decision" segment last night from the West Coast, our own Jim Cramer sat down with Mark Benioff, chairman and co-CEO of Salesforce.com. They discussed all of the happenings at this year's Dreamforce. All well and good but if this tech conference is bullish or bearish we should be able to see how investors and traders are "voting" by looking at the charts and indicators.

In this daily bar chart of CRM, below, we can see a long and quite durable-looking rally. Prices have not quite doubled in the past twelve months but they have doubled since early 2017. CRM is above its rising 50-day moving average line. The rising 200-day line is below the market and it could be said that prices are extended above the line. The daily On-Balance-Volume (OBV) line has been rising the past year and recently made a new high for the move up to confirm the price advance. In the bottom panel of this chart is the 12-day price momentum study which shows a bearish divergence -- momentum has slowed from July to date while prices have made higher highs. The pace of the advance is slowing and this can foreshadow a correction.

In this weekly bar chart of CRM, below, we can see the big upside price performance of CRM the past three years. Since early 2017 the rally has been parabolic-like with prices staying above the rising 40-week moving average line. Prices are about $30 above the moving average line -- probably the biggest premium we have seen for this stock. The weekly OBV line has been bullish since late 2016 but it has leveled off the past three months. Prices have rallied the past three months but the volume has not expanded. This failure to confirm the new highs in price with new highs in this indicator could become a problem. In the lower panel is the 12-week price momentum indicator which shows a slowing from early July -- not unusual at these lofty levels.

In this Point and Figure chart of CRM, below, we can see the uptrend from February 2017 (look for the "2" early on the chart). The chart shows a potential upside price target of $188. A decline to $150.93 could open the way to some further weakness.

Bottom line strategy: CRM is still in an uptrend with a higher Point and Figure target of $188, but momentum is slowing on a daily and weekly scale. With prices extended above the 200-day moving average line we should be prepared for a shallow correction or pullback in prices before they ultimately move higher.