The Key Take-Aways
- After posting better-than expected results for the third quarter, Workday provided an outlook on subscription revenues that was below Wall Street estimates. This sent shares of this software maker down sharply during early Wednesday trading.
- A bearish divergence has formed between the stock's November peak and the relative strength index, a technical occurrence that signals weakening buying momentum.
- Investors should monitor important support areas on Workday's chart around $237, $223, and $207 while also watching a key overhead level near $279.
Shares of Workday, a human resources and financial software provider, fell in early Wednesday trade after the company reported better-than expected results for its third quarter. However, it provided an outlook on subscription revenue that was lower than Wall Street had anticipated.
Zane Rowe informed analysts in an earnings call that, in certain parts of the globe, deals are being scrutinized with greater scrutiny. The company does see opportunities for growth in the public sector, as governments are focusing on achieving economies of scale.
The stock was down 10% at around $243 in the opening minutes of Wednesday's trading session, pushing the year-to-date decline to 12%.
We will examine the chart of Workday and apply technical analysis in order to determine important levels for investors.
Bearish Divergence
Workday shares reached two highs on the chart from August to November after breaking through a downward channel.
As the second high reached, the relative strengths index (RSI), made a lower high. This created a divergence that is considered a negative technical event that indicates a weakening of the buying momentum.
Workday’s chart can be analyzed to identify several areas of support that could provide a boost during earnings-driven sales. It will also highlight a critical overhead level for the stock to monitor if it makes a comeback.
Watch out for Important Support Areas
Investors should first monitor the $237 region. The multi-month chart trendline could support this area. It connects trading levels that are similar from July 2023 through October of this year.
Bulls failing to protect this key technical level may see the price of the stock fall down to $223. In that area, shares could attract interest from buyers near comparable prices located roughly half-way between early September’s swing high and the late October swing low.
If the drop is more significant, it could lead to a new test of support at $207. Investors can look to buy in the area near a horizontal “line” that connects the prominent troughs from the October 2023 chart to the June 2018 bear trap price.
The Key Levels to Monitor
Investors should keep an eye on the $279 mark as the price of the stock begins to recover. Investors who purchased below the 200 day moving average can look to exit near the November high, which is also close to the December peak and the March countertrend.
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According to the article, as of its date of publication, the author did not possess any of these securities.
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