Salesforce earnings are sparking a breakout. Where the stock is going, according to the charts
Watch the gap! That has been a common theme we’ve seen in many of the beaten down software stocks. After tremendous selloffs, they are now coming back to life. Their reversals started with a large price gap higher. First, it was Microsoft . Then it was Palantir . We also saw it in Snowflake , and now we see it in Salesforce . Coming into earnings, Salesforce was at a technical threshold that you rarely see. When examining the stock on multiple time frames — the daily, the weekly, and even the monthly going back decades — we see shares were at a pivotal moment. Up until now they had been a victim of the so-called “SaaS-pocalypse”. As a technician, we were waiting for price to confirm whether it was all clear to jump back into the waters. Today’s gap gives us that needed information. Let’s examine… That gap! This is what we need to watch. We now know the downside risk. Yes, I hear your snarky thoughts — we missed the move. I get it, but you want to be safe and not gamble at what was essentially a technical coinflip going into earnings. We’ve seen them beat before, we’ve seen good guides, yet price action didn’t follow. This time it’s different, so let’s trade it. The multiple setups On the daily chart we saw this $208/$210 level act as major resistance several times. Now we’ve broken above resistance and will use this level as our risk threshold. This is how we monitor the stock’s health going forward. Not only did the stock break above resistance with gusto, it broke its longer-term downtrend going back to late 2024. Shares also recaptured its 200-day moving average and safely moved above it — all signs of a major trend change. On the weekly chart, we get another perspective of the move and what levels to monitor next. Shares broke above the 50-week moving average, snapped their downtrend and have sights set to the $240 area and the 200-week moving average. This could prove to be near-term resistance and a level where shares may experience a natural and slight pullback. A break and weekly close above $238 sets the stage for a greater run back to the $260 level. Any pause and retracement back into that gap gives investors an opportunity to start to accumulate shares knowing that the $230 level should now act as support. Then if you want to get crazy, let’s go back two decades and look at the major trend. We noted this was a crucial level, and looking at longer term uptrend, we see why. That trendline was in danger of breaking but held. Now shares look to resume that longer term trend. One major item of interest to note is the historical significance of its momentum indicators. Shares had only reached oversold on the monthly stochastic three times in its history — 2009, 2023 and 2026. On the first two occasions once the indicator turned upward and out of oversold territory shares began a multi-year uptrend. Will 2026 make it three-for-three? The stochastic just triggered a buy signal. Now we have a potential bullish crossover in its MACD. Again, on the monthly timeframe this has proven quite significant. Is this the signal longer term investors have been waiting for? The trade Short term traders use today’s gap. Buy now and set your stops just below the $230 opening gap. If the rally fails then you get out with a little loss, but the hope is that this is your new support level and shares continue to climb like we saw in Microsoft and Palantir. Long-term investors, congratulations. The trend has changed. You can breathe a sigh of relief. Now we look to see if we can get back the momentum that you have known for years. The risk reward metrics for that long-term investor show this is a good opportunity to buy a great name in software and put it away. Fundamentally, the fears that AI was going to disrupt Salesforce growth may have been overdone . Jim Cramer’s interview with CEO Marc Benioff and Anthropic’s CEO Dario Amodei is must watch TV. If you believe like they do that AI can help Salesforce in the future and not cannibalize it, then this gap will be symbolic of a new start. An upside target of $260 looks attainable over the next quarter with defined downside risk. Longer term we see the potential for shares to climb much higher. We finally have that all clear for traders and investors alike. Jay Woods, CMT with Chase Games DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. 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