On the 1st of December, Salesforce announced it was acquiring Slack, ticker symbol WORK, for $28 billion in which its CEO described the deal as a ‘match made in heaven’. Since the announcement, the price gapped down 8%. Despite the deal having a $28 billion valuation cost, Saleforce has lost $36 billion in valuation because of it. An overreaction, maybe?
Technically, CRM is in a massive . Bull flags are found in stocks with massive uptrends. It is called a flag as the pattern of consolidation looks like a flag, after a vertical rise in the stock, which looks like a pole. The psychology behind the pattern is that the stock does not fall steeply, instead bulls buy the dips as the stock prints lower, creating the pattern.
CRM is also just above a $220 , which it tested and rejected in 6 of the previous 9 trading days – the other 3 days closed above it. Price is also being supported by an upward connecting the March low and the low of the 2nd December, the first trading day after the Slack acquisition announcement.
Price has also filled the gap created by the monster announced on 24th August which caused the stock to sky rocket 25%.
If the price bounces of this and the bottom of the to the top of the channel, this would represent up to 15% upside. If the price was to break this channel and continue to retest all time highs, this would be 28% upside
Bank of America reinstated Salesforce as buy and named it a top pick. It said today that “We are reinstating coverage on Salesforce.com with a Buy rating and $275 PO, and view it as a top pick. Salesforce screens well in our 4M’s framework for software investing - Market, competitive Moat, Management strength and Margin potential.”