One of the issues facing traders right now is the pending holiday season which typically sees less active markets. That lack of conviction or volume in trading can often bring about “fake” movement in stock prices and that can lead traders from getting sucked into getting involved in a longer-dated trade when they should be holding off and waiting for more confirmation. Is that the case here in CRM?
CRM – Daily Chart
You can see from the above daily chart, that CRM sold off in late-November with the entire technology sector … was that just a minor correction in the bigger up-trend, or was it just the first leg (i.e., the “A” leg) in a bigger ABC corrective pattern.
As you can also see, CRM has pushed higher and is sitting right now either in a perfect spot for Wave-B to end and Wave-C lower to begin lower. You can also see the other, more bullish argument on the 195-min chart following below.
CRM – 195 Minute Chart #1
As you can see on the 195-min chart above, price broke above the ATR resistance level a couple of days ago and has been consolidating sideways around that break level ever since – that is exactly the type of price action I like to see to confirm that price has “accepted” the ATR break. So in theory, I would expect price to continue pushing higher here soon as the smaller time frame consolidation pattern completes itself.
However, I like to see price action confirmed with the R/S indicator shown on the right side of the chart above … I have a downtrend line drawn on top of the R/S consolidation pattern and I have created an audio alert that will warn me when R/S is attempting to break that line. At that point, I would be more comfortable assuming that CRM has what it take to push higher.
CRM – 195 Minute Chart #2
You can see the trend strength histogram has consolidated from a rather high reading registered during that November pull-back in price … in theory, CRM’s price should be better able to begin a new expansion push here soon. Is that push higher or lower?
QQQ – 195 Minute Chart
If CRM is going to push in a new expansion phase, it will be stronger if the whole tech market is in sync with it. I like to look at the price action of the sub-sector or with the overall market when trying to guage how much “coiled” pressure exists in the next potential move.
The one chart indicator that I don’t like at from the above chart, if I am looking to confirm a bullish move, would be the position of the Moving Average Spread indicator … we have just recently had a bullish cross-over, but note that this cross-over happened at a lower point compared to the prior couple of cross-overs. That typically is a sign of weakening strength and that is not something I like to see when trying to determine a bullish trade setup.
Note the MA Spread indicator action from October … in late Oct we had another bullish cross-over, but that one followed a lower bullish cross-over. That is what I like to see when assessing bullish trades.
CRM – 30 Minute Chart
So bottom line, with the holiday season upon us, and the FOMC rate decision later today, I think traders should be patient and wait for a bigger confirmation signal from say the 30-min chart. Wait for R/S to break out of its consolidation pattern (higher or lower) and then look at the likelihood of that being the start of an expansion phase that you could trade for the following 5-8 trading days.
Cheers … Leaf_West
CRM – 30 Minute Chart