Guide to Investing in Troubled Stocks
- David Keller provides insights on how to analyze charts of beaten-up stocks, specifically focusing on Salesforce.
- The article emphasizes important factors to consider before making such investments.
- Understanding these tips can help investors navigate challenging market conditions.
Published on August 7, 2024, Salesforce.com (CRM) has shown signs of short-term strength following a period of weakness, but investors are advised to approach with caution. The stock's daily chart reveals a bullish trend from its October 2023 low to a peak of approximately $320 in late February 2024. However, the question remains whether this momentum can be sustained or if further selling pressure is imminent as traders seek to minimize potential losses. Recent trading activity indicates a mixed outlook for CRM. After a significant drop, buyers stepped in, pushing the price from a low of around $210 back up to $165 in early July. Analysts highlight the Relative Strength Index (RSI) as a critical indicator, with bullish phases marked by an RSI between 40 and 80, while bearish phases linger between 20 and 60. The RSI fell into the bearish range in April, suggesting insufficient buying power to reverse the downtrend. The inability of CRM to maintain its 50-day moving average further complicates its recovery prospects. As long as the RSI remains in the bearish territory, the stock lacks the demand typically associated with a robust price recovery. Analysts recommend that investors seek opportunities in stocks demonstrating clear signs of strength rather than those exhibiting weakness, particularly until CRM can break through its trendline resistance. This analysis serves as a general overview and does not constitute financial advice or a recommendation to buy any securities.