Double Bottom Breakout from Major Fibonacci Support
The stock of ServiceNow, Inc. (NOW) triggered a double bottom bullish reversal this week with a breakout above $110.85. It formed near the 78.6% Fibonacci retracement of the upswing from the
October 2022 low and a 150% extension of the April 2025 advance. A bullish divergence in the Relative Strength Index (RSI) provided supporting evidence for a possible bottom. Since the breakout is still new, the first pullback will be watched closely by traders for potential continuation setups.
Reclaim of 20-Day Moving Average Signals Near-Term Strength
Signs of strength began following the second bottom at $99.18. The first signal was a gap up above the 20-day moving average. The 20-day average had marked trend resistance for much of the time since it failed as support in November. The initial low for the bear trend was $98.00, which completed a 59.1% decline in NOW from the $239.62 peak in January 2025.
Two days following the initial recovery of the 20-day average, it was confirmed as support. Once a key resistance level is recovered and then confirmed as support by subsequent price action, the trend may be ready to continue. That appears to be the case with NOW, as a successful test of the 20-day average preceded the upside trigger of the double bottom the following day.
Weekly Structure Points to Overhead Resistance Levels
Given the trigger for a bullish reversal pattern from a key Fibonacci retracement zone, and following a sharp bearish correction, the counter-trend rally has the potential to eventually test resistance near the downtrend line and 50-week moving average. However, additional strength is required before those higher resistance levels come into focus.
An initial target zone would start with the April 2025 higher swing low of $135.73. That marks the lower boundary of a target range extending up to the 38.2% Fibonacci retracement level at $141.35. However, the 20-week moving average is falling sharply and heading towards that price zone. It will present a key indicator to help gauge the strength of the rally. Before higher target levels are reached, the 20-week average needs to be reclaimed. The most obvious potential support levels on a pullback are the neckline of the double bottom at $110.85 and the 20-day moving average at $106.17, which is now rising.
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