After shedding nearly 13% on Tuesday, NOW stock looks dead set on diving to $360

• NOW stock lost 12.7% on Tuesday on negative guidance.
• CEO Bill McDermott worried enterprise software investors with a negative industry outlook.
• ServiceNow long-term support sits in the $350s-$360s.

ServiceNow (NOW) is and has been one of Wall Street's favourite software plays for sometime now. The enterprise software firm offers a rather extensive suite of manufacturing and corporate platforms that focus on automating company tasks to save labor and time.

Also read: Amazon Stock Deep Dive: AMZN price target at $106 with near-term risks offset by long-term growth

A straight-forwardly dour assessment of the macro environment by the company's CEO, however, sent shares tumbling on Tuesday, and now a much higher inflation figure on Wednesday threatens to bring the mammoth software dealer back down to support at $360.

ServiceNow stock news

ServiceNow CEO Bill McDermott was interviewed on CNBC's Mad Money program late Monday and said that the starkly negative environment stemming from a war in Europe, the highest inflation in 40 years, and quickly rising interest rates was too much all at once for most businesses. These worrying signs were leading businesses to shut down long-term technology investment projects and focus on shorter-term projects.

"You're at 41-year high inflation; the dollar right now is the highest it's been in over two decades; we have interest rates rising," McDermott said. "People [are] worried about security. You've got a war in Europe, so the mood is not great."

McDermott hinted that worries over these variables, plus the possibility of a recession, would reduce demand for some business software services over the next year. What McDermott probably did not realize is that his interview would drag down a number of enterprise software leaders including his own. Firms as varied as Twilio (TWLO), HubSpot (HUBS) and Salesforce (CRM) all tanked after the interview and into the next session on Tuesday. 

BMO Capital Markets analyst Keith Bachman seemed to suggest that a further sell-off in the sector was warranted. McDermott is indeed a high-profile tech executive, and so when he whines analysts listen. Bachman was expecially focused on McDermott's suggestion that the strong dollar would negatively effect many US software providers in the coming quarters and that the European sales cycle would lengthen. This means many of these high-achievers may miss revenue targets in the near term.

For its part, ServiceNow is known for its steady expansion of corporate customers and revenue.

ServiceNow's last four quarters of revenue and profit

Wednesday's US CPI print at 9.1% has the markets tanking further. With forecasts calling for headline inflation at 8.8%, this sure will not warm the hearts of tech executives wishing the macro sphere would stop the fear train.

ServiceNow stock forecast

There is no need to even look up the death cross scenario (50-day moving average crossing below the 200-day moving average). That took place all the way back on February 16. For those knife catchers among us, the whole question is where this NOW stock sell-off ends and where to enter a long trade. 

For myself, the sweet spot sure looks like the demand zone between $352 and $363. From the weekly chart below, you can see how these regions worked as resistance in February 2020 and then again as support in May 2020. That was before the stock took off. 

Compared to many enterprise software hot-shots who have tanked more than 70% in 2022, NOW is a bit more mature, a bit more favoured among institutions. NOW shares are only down 32% year to date. Still, the stock is off another 2% in Wednesday's premarket, and it seems likely that this downtrend will continue until the mid-$300s are in sight.

NOW weekly chart

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