Shares of ServiceNow (NOW) fell below the company’s gloomy guidance, according to reports on Thursday. Let’s take a closer look at the charts and indicators to see if the risk is on the downside or if there is an opportunity on the upside.
On NOW’s daily bar chart, below, we can see that shares have been finding buying interest (support) in the $420-$400 area for the past three months. Prices managed two rallies above the 50-day moving average line in June and early July but recently stopped a bounce below the 50-day line.
The On-Balance-Volume (OBV) line made a new low in July to continue the long downtrend and tell us that NOW sellers have been more aggressive than buyers for several months. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line and pointing down – not a good recipe for a rally.
In NOW’s weekly Japanese candlestick chart, below, we can see the difference between eastern techniques such as candlesticks and western techniques such as the OBV line. The candlesticks show us some lower shadows which tell us that traders are rejecting the lows. The slope of the 40-week moving average line remains lower.
The OBV line has weakened since October and shows only a very small increase in July. The MACD oscillator is struggling to improve.
In this daily Point and Figure chart of NOW, below, we can see a potential downside price target in the $373 area.
In this second Point and Figure chart of NOW, below, we used weekly price data. Here the software suggests a downside target in the $212 area.
Bottom-line strategy: Thinking about the four charts of NOW, above, I see them as a collection of views — with positive indications and favorable price targets. The last three months could be a descending triangle formation and that means a downside price break could happen in the coming weeks. The best future course is to avoid the long side of NOW.
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