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Cloud-computing vs crude oil: Lessons in a Dramatic Chart

NYSE:CRM   Salesforce.com Inc
One of the biggest events in the history of the Dow Jones Industrial Average happened last August when Salesforce.com replaced Exxon Mobil as an index member. A 21-year software company elbowed out a transnational giant tracing its origins to John D. Rockefeller and the dawn of modern capitalism.

Despite the stunning endorsement, things haven’t worked out so well for CRM since then. Its shares peaked above $280 one week later and then turned lower. (That was a giddy moment for growth stocks because Apple and Tesla had just split their shares.)

Additionally, TradeStation analytics show that CRM has gone 172 sessions without a new 52-week high. That’s the longest for any member of the Dow Jones Industrial Average . XOM , in contrast, hit a new high yesterday.

It’s a good lesson in froth and exuberance: Just when it seems things can never go wrong, it’s often a sign of the top. Other adages that could apply are "buy the rumor, sell the news," or "be fearful when others are greedy."

The chart above compares CRM to XOM since they traded places in the Dow. Notice how XOM lagged for a couple more months but then ripped higher after November 9’s vaccine news ignited the reopening trade.

Switching to CRM's candlestick chart below, some challenging patterns may have emerged. The 50-day simple moving average ( SMA ) slid beneath the 200-day SMA on March 22, resulting in a “death cross.” Next is the descending channel in place since the peak in early September. If that trend continues, it could imply move toward $180.


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Comments

Look again, but use a wider timeframe. XOM is a dying company, attempting to offload an oilfield to Iraq, and far too reliant on commodity prices. Their premium ratio will continue to pull back far into the future. I've got no horse in this race, as I think both are terrible—but at least CRM has that sweet vega. I'll take those consistent dips any day of the week and twice on sunday.

Good luck!
+3 Reply
love this post. thank you.
+3 Reply
nice job!
+1 Reply
WHENEVER I DOUBT MY DECISION MAKING CAPABILITY... I LOOK AT THIS CHART~!!
+1 Reply
Thanks for sharing as always @TradeStation! The team featured this in Editors' Picks
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