DocuSign Inc. (DOCU) reported an earnings and sales beat Thursday evening and its share price is up sharply in early turnover Friday. Let's check out the charts and indicators of the provider of electronic signature software to see where DocuSign's stock may go from here.
In this daily bar chart of DOCU, below, I can see that prices have been in a glide path lower the past year. DOCU has stayed below the declining 200-day moving average line and below the bearish 50-day line for much of the year. DOCU is trading above the 50-day today.
The daily On-Balance-Volume (OBV) line has been in a downward trend the past year but shows a slight uptick in early December. The 12-day price momentum study in the lower panel shows higher lows since June as the pace of the decline has slowed. This is a bullish divergence when compared to the price action making lower lows. Bullish divergences can foreshadow rallies.
In this weekly Japanese candlestick chart of DOCU, below, I can see a mixed picture. Prices have been in a downward trend from the middle of 2021. DOCU trades below the negatively sloped 40-week moving average line. The recent candles have small real bodies and suggest a balance between buyers and sellers. The weekly OBV line shows a slight rise from early October. The 12-week price momentum study shows higher lows the entire year, telling us that the pace of the decline has slowed. This is a bullish divergence but obviously a terrible timing device.
In this daily Point and Figure chart of DOCU, below, we can see a potential upside price target of $70.
In this weekly Point and Figure chart of DOCU, below, we can see an ambitious price target of $82.
Bottom line strategy: I typically do not switch from bearish to bullish on a dime. I typically like to see a stock transition from a downward trend to a sideways/basing trend before going into an uptrend. Friday's rally in DOCU is a start. Now let's see prices build a new base pattern before buying shares.
