ServiceNow (NOW) reported earnings and earnings for the first quarter Wednesday after the close of trading. The numbers are impressive but the question the charts suggest is whether NOW can sustain Thursday’s gains. Let’s look at the charts.
In this daily bar chart of NOW, below, we can see that prices gapped higher on Thursday at the opening but are now trading near the intraday low. This kind of temporary price strength tells me that traders used early profits to make a profit. A stock that is higher the gap and continues to rise is clearly stronger. That is not the case NOW.
Prices are lower on the declining 50-day moving average line as well as the declining 200-day line. The On-Balance-Volume (OBV) line has dropped from late December telling us that NOW sellers have become more aggressive than buyers-the volume on the down day is heavier than the up days. The Moving Average Convergence Divergence (MACD) oscillator is bearish.
In this weekly Japanese candlestick chart of NOW, below, we see a large top formation. Prices may outline a large and complex pattern at the top of the head and shoulders. In 2020 we could see a possible “left shoulder”. A “head” in late 2021 and a “right shoulder” in 2022.
The $ 450 area is a potential “neckline” when damaged can cause further reduction. The right shoulder shows some rally failures below the cresting 40-week moving average line.
The weekly OBV line shows a similar leading pattern as its rotation over the past two years. The MACD oscillator is bearish.
In this daily Point and Figure chart of NOW, below, we can see that prices have reached the downside price target of $ 489.
In this weekly Point and Figure chart of NOW, below, we use a five box reversal filter. Here the software suggests a target in the $ 334 area.
Bottom line strategy: NOW may continue to jump in the short term but there is a big risk that we are looking at a big leading pattern remains. I will stay on the side.
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