Splunk stock is rising on hopes for a potential M&A buyout. Here’s how the chart looks now.
The markets are a mess again on Monday, as investors try to find their footing amid geopolitical tensions. However, investors in Splunk (SPLK) – Get Splunk Inc. Report are quite pleased on the day.
Shares of Splunk are up close to 10% on the day and are near session highs. That’s followed by reports that Cisco Systems (CSCO) – Get Cisco Systems, Inc. Report reportedly offered more than $20 billion to acquire the firm.
However, given that the company’s current market cap is just shy of $20 billion at this moment, it’s no wonder no deal has come to fruition.
With its valuation hovering near six times 2023 revenue estimates and with the stock still down 45% from its high in Sept. 2020 (even after today’s rally), it’s obvious why bulls feel they deserve more.
Many investors — in Splunk and elsewhere — are likely wondering when M&A will become a catalyst for higher stock prices.
We’ve seen deals fall apart in recent weeks, like Nvidia’s (NVDA) – Get NVIDIA Corporation Report deal to buy Arm, and we’ve seen a brutal selloff in growth stocks.
Will M&A begin to spur stocks like Splunk higher?
Trading Splunk Stock
Daily chart of Splunk stock.
Chart courtesy of TrendSpider.com
Right now, Splunk stock is giving traders a potential breakout from its current trading range, as well as a monthly-up rotation over the January high of $124.72.
If it can remain in this state — meaning if these observations remain true — then Splunk stock could have more upside potential.
Specifically, I would look for a potential squeeze up to the $135 area. There the stock finds its 200-day and 50-week moving averages, as well as the weekly VWAP measure.
In other words, this is a significant area and should Splunk get there, it’s a reasonable area for traders to reduce their position size.
If it can continue to push higher, the 200-week moving average may next.
On the downside, things get a bit trickier if Splunk is rejected by last month’s high and channel resistance.
Below these measures and the $123.75 level could keep the $120 mark on the table, along with the 10-day and 21-day moving averages and the daily VWAP measure.
If those levels fail to support the stock, last week’s low and this month’s low could be in play, with both at $113.98.
