Salesforce.com Inc. (NYSE:CRM) plunged 5.53% to close at $200.03 on Thursday. The decline comes after an 8.3% crash on Wednesday. Two factors hit the market during the week, partly explaining the decline.
First, the threat of Russia invading Ukraine means that NATO and the United States would certainly be pulled into the conflict. The market has been discounting this possibility, with Dow Jones shedding 600 points as CRM declined 5.53%.
The second concern is the growing inflation problem in an economy with rising unemployment. To stem the inflation, the Fed may raise interest rates in March. The market is discounting the impact of these macroeconomic trends.
For Saleforce.com, the macroeconomic environment also comes with reduced demand from enterprise customers as companies cut their spending in preparation for the lingering tough times.
CRM breaks below $210 support
Source – TradingView
Technical analysis indicates that CRM has been correcting since November 2021. This week’s decline in share price is just a continuation of the market correction. The company tested the $210 support level and is currently breaking below, with a high possibility of the price crashing further to levels between $180 and $160.
CRM faces a market correction accelerated by the risk of a tight macroeconomic environment. The company has been a beneficiary of the COVID-induced demand for growth-oriented technology stocks since August 2020.
With industry peers experiencing similar pressure, the sentiment is currently against the stock, with a potential plunge to the lower levels. Thus, I recommend a wait on Salesforce until the ongoing correction ends and considering a trade after the company releases the fourth-quarter earnings on March 1.
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