Time to Sign Off of DocuSign

The stock has tumbled after the company reported earnings.

DocuSign Inc. (DOCU) released its latest earnings figures Thursday night. The stock is down sharply in recent days. Is it time to book profits?

We looked at the charts of DOCU on Tuesday before earnings, writing, "The at-home economy seems to be booming and the price of DOCU has been soaring. Prices need to 'catch their breath' and consolidate some of the recent price gains. I would look for some sideways price action and keep in mind that the upcoming earnings report needs to deliver. Longs should risk a close below $225 now." (bolding added)

Let's check out the charts and indicators again Friday to see if a new strategy is warranted.

In the daily bar chart of DOCU, below, we can see that prices have retreated to test the rising 50-day moving average line. The On-Balance-Volume (OBV) line shows a rise until just recently. The sharp move down in the OBV line tells me that traders have become aggressive sellers of DOCU.

The Moving Average Convergence Divergence (MACD) oscillator has been weakening since early July. 

 

In the weekly Japanese candlestick chart of DOCU, below, we can see a long upper shadow telling us that traders rejected the highs. Prices are still above the rising 40-week moving average line but this indicator is always late at turning points.

 

The OBV line has diverged from the price action the past two months. The MACD oscillator is still bullish but it has narrowed in recent weeks. 

 

 

In this updated daily Point and Figure chart of DOCU, below, we can see that the software is projecting a downside price target of only $120. Not pretty. 

 

 

 

Bottom-line strategy: A lot has changed since Tuesday, especially with the chart of DOCU. We recommended that longs should risk a close below $225 -- time to leave!

 

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