Bears Win the Battle for salesforce.com, Inc. (CRM)

In last week's edition of Trading Tools, we examined Tiffany & Co. (TIF - Analyst Report) after the Zacks Unusually High Option Volume screener indicated that the high-end jeweler was the target of a put spread. Employing the same filter for today's column, a different equity caught my eye: salesforce.com, inc. (CRM - Analyst Report) , the San Francisco-based provider of customer relationship management (CRM – hence the ticker) services to businesses worldwide.

Fascinated by 40

According to the Zacks screener, put players went crazy over CRM last Thursday. During the session, the security saw roughly 8,900 puts change hands – nearly 6 times its average daily volume of fewer than 1,700 contracts. As a result of the bombardment of bearish bets, the stock's Schaeffer's put/call open interest ratio (SOIR) jumped from 0.93 to 1.04 overnight. In other words, puts are now more popular than their call counterparts among options slated to expire within 3 months.

Digging deeper into the data, it appears the CRM Jun 40 put was most popular Thursday, with approximately 4,100 new positions opened. On the flip side, the 40 strike also captivated call traders, with about 1,100 new contracts open. This round-number strike is now home to peak open interest in the front-month series, with roughly 5,500 puts and almost 2,000 calls in residence.

A Victory for the Bears

Turns out, most visitors to the options pits were preparing for salesforce.com's turn in the earnings limelight after the closing bell Thursday. After scanning the firm's figures, it's clear the bearish options bettors won this battle.

Though the business software sultan said first-quarter profit nearly doubled from a year ago, the company's prospects for the road ahead were not what the bulls wanted to hear. The firm said it expects to record revenue of $312 million to $313 million in the second quarter, below analysts' estimates. In addition, salesforce.com trimmed its full-year revenue outlook to between $1.25 billion and $1.27 billion, compared to prior projections for $1.30 billion to $1.33 billion in sales.

"New business wasn't as strong as we hoped," said CFO Graham Smith, stating that new orders declined in the single digits on a percentage basis from a year prior. Plus, existing clients aren't adding new features as rapidly as a year ago, new customers are signing smaller contracts, and it's taking longer to close deals, according to Chief Executive Marc Benioff.

Challenges on the Charts?

In light of the news, shares of CRM plummeted Friday. Furthermore, after outperforming the S&P 500 Index (SPX) by 18% during the past 60 trading sessions, the stock is now poised to close the month beneath support at its 10-week moving average for the first time since mid-February.

What's more, the selling pressure could actually escalate in the near term, should salesforce's gloomy guidance spook the bulls. According to Zacks, the brokerage bunch had high hopes for CRM ahead of the report, with 14 out of 24 ranking analysts deeming the stock worthy of a "buy" or better rating. A fresh wave of downgrades from this optimistic outfit could spell trouble for the shares.

Read the full analyst report on CRM

Read the full analyst report on TIF