Salesforce Inc (CRM)

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Riding the Stockwaves: Technical Update on Salesforce.com, Inc
By: Jason Appel | January 26, 2021

• Following the Elliott Wave analysis:

Since the lows of March 2020, Salesforce (CRM) has managed to recover nicely off of a 41% pullback from the February 2020 high. Initially climbing 146% off of the lows into the September 2020 highs, CRM has pulled back into the start of 2021. Even with all of the volatility, this stock managed to gain 36% in 2020 and we see it set up to gain another 50-90% on the next larger rally over the next 6-18 months.

Fundamentally, CRM has performed well financially in 2020 and they have strong guidance on earnings and revenue growth for 2021. From the December 01, 2020 Earnings press release: “Third Quarter Revenue of $5.42 Billion, up 20% Year-Over-Year,” and “Raises FY21 Revenue Guidance to Approximately $21.10 Billion to $21.11 Billion, up Approximately 23% Year-Over-Year.” Clearly Salesforce is performing strongly and expectations are for continued growth.

From an Elliott Wave perspective, CRM displays an impulsive structure off of its post-IPO August 2004 lows. The initial 5 wave move for Primary 1 (circle 1) completing into the June 2008 high took shape as a 5-wave leading diagonal. After finding support in November 2018 near the .618 retracement (an important Fibonacci level for Elliott Wave retraces) of Primary wave 1, Salesforce took off higher in Primary wave 3. In Elliott Wave, 3rd waves within impulsive patterns are typically expected to be the strongest moves in the direction of the trend, and CRM has not disappointed, reaching over 50x so far from the 2008 low to the recent all-time high in September 2020

On the weekly chart, we see price nearing the latter stages of the Primary 3rd wave (circle 3). Elliott Wave impulses take shape as 5 wave moves, wherein waves 1, 3, and 5 are themselves composed of 5 wave moves. Note the 5-wave structures throughout all degrees of wave circle 3.

Off the March 2020 lows, price has formed 3 waves up into the September 2020 high and as of January 15th, 2021, has held support for a wave circle iv to maintain the impulsive structure. Thus, from here we are expecting wave circle v to develop. Since January 15th, price has formed another micro 5 waves impulsive move higher, signalling that a low is likely in place and that price has started up in wave circle v of 5.

It should be noted that the structure of wave (5) from the 2016 lows is quite extended within this current wave 5 from the March 2020 lows. However, we see a phenomenal risk/reward opportunity here to trade long, targeting minimally the $335 level, and ideally the 2.0 extension on the black Fibonacci lines around $362, with an outside possibility to reach the $420 region. Given the recent micro impulse price should preferably maintain above the 1/15 low, 212.98 at all times. For traders who wish to play the setup with a looser stop, we see this setup as viable so long as CRM maintains above $175~ but that represents far less favorable risk to reward.

Lastly, please consider that CRM has a very complete structure off the 2008 lows for its Primary 3rd wave. Supposing the aforementioned target region ($335-$420) is struck, odds will increase of price forming a very lasting top and a substantial pullback is expected. Thus, the target region is an excellent level to reduce exposure or exit long positions entirely.




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