The American company headquartered in San Francisco, California, that allows organizations to manage electronic agreements, Docusign Inc. (NASDAQ: DOCU) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Pennant Pattern Breakout: As seen from the daily chart, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range. This is a classic pennant pattern and is marked in the chart in pink color. A pennant is a continuation pattern. Whenever a stock breaks out of the pennant pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the pennant pattern. This is a possible sign of an upcoming bullish move.
Daily Chart – DOCU
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#5 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines. The +DI line is also currently above the –DI line. This indicates possible bullishness.
#6 Double Bottom Pattern: The stock had recently formed a double bottom pattern which is a bullish reversal pattern. This is marked in purple color in the daily chart. The stock currently looks poised for a breakout from this double bottom pattern. A breakout from a bullish pattern like a double bottom pattern indicates that the stock could possibly move upwards.
Weekly Chart – DOCU
#7 Bullish Stoch: The %K line (blue line) is currently above the %D line (orange line) of the stochastic in the weekly chart. This usually indicates bullishness.
#8 Bullish ADX and DI: The ADX line has currently moved up from below –DI and +DI lines. The +DI line and the ADX line is also currently above the –DI line. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for DOCU is above the price of $252.00.
TP: Our target prices are $265 and $280 based on the breakout from the pennant pattern.
SL: To limit risk, place a stop loss near $244.00. Note that this stop loss is on a closing basis.
Our target potential upside is 5% to 11% in the next 3-6 months.
For a risk of $8.00, the target rewards are $13.00 and $28.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the pennant pattern breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
This is the #1 Stock to Buy for the AI Tidal Wave [sponsor]Marc Chaikin warned people about NVDA before its 2023 bull run - now he's naming his next pick or the AI tidal wave. Learn more here.