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Is DocuSign Stock Ready For Another Swing Trading Chance?

DocuSign (DOCU) sticks out as one of the leading stocks of the market with a best possible IBD Composite Rating of 99. These are often the stocks you keep on your swing trading radar just waiting for an opportunity to purchase. DOCU has stock provided multiple opportunities in the last few months.




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Swing Trading Example: DOCU Stock

Leaderboard got an early entry on DOCU stock back on June 4. It joined the Leaders List after its Q1 earnings report pushed the stock back above its 200-day line. It ran up from the 231.39 entry to just below 300 before its first pullback to the 21-day moving average line (1). We were waiting for our chance at the stock and the upside reversal with a strong close offered it. That’s where we took an entry on SwingTrader at 278.07.

Using a position trading style, Leaderboard is looking for a bigger gain. SwingTrader focuses on the quicker profit.

A third of DOCU stock came off SwingTrader on June 19 with a 4.5% gain (2). Another third left on July 22 after hitting 10% profit (3). The final third exited SwingTrader as it moved below the lows of the prior three days and tested its 300 level (4). Although it closed above our exit, DocuSign stock didn’t make much progress for weeks.

Next Stop The 50-Day Moving Average

DocuSign stock eventually came all the way back to where we took our first profit in our previous swing trade (2). In this case, the 50-day moving average line gave us an entry. After hugging the line for a few days, DOCU stock started to show signs of life again. A gain of nearly 1% came in the heaviest volume in weeks (5). It wasn’t a great close but the tight action at the moving average line is worth paying attention to.

A couple of days later and DOCU stock rejoined SwingTrader as it crossed above the highs of the tight area (6). It was another day of heavy trading volume compared with the most recent activity.

We played it in a similar way. Once we had a 3.5% gain, we took our first third profit (7). That coincided with a downside reversal which usually suggests weakness to come. The price remained above the 5-day moving average line and we gave it some room. Locking in the first third gives us that flexibility. If the weakness does come in, it’s easier to keep the trade positive.

Earnings Forces A Decision

DocuSign stock seemed to run into an area of congestion around 305 and lost steam again (8). When it looked like it would close below the 5-day line, we considered taking our remaining profit (9). Earnings were coming so we wouldn’t be holding the stock beyond two days.

However, the close was well off the lows with support again at the 10-, 21- and 50-day moving averages. We compromised and shed another third of our initial position.

Finally, two days later we exited the remainder as earnings were scheduled after the close (10). Our gain was milder this time around but we still eked out a nice profit in just a couple weeks.

After the earnings report on DocuSign, there was initial weakness in the price. However, the stock quickly got above 300 after the open and we added it back on SwingTrader for another shot.

For some, the idea of buying a stock back at a higher price than you sold it shortly before seems crazy. But with DOCU stock finding support at its 50-day line again, we’ll know pretty soon if it isn’t acting right. That sets up a low-risk trade with a lot of potential reward for this market leader.

More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.

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