Docusign – A Bullish Reversal Pattern Sets Up A Good Risk/Reward Trade

By | July 12, 2018

Docusign (DOCU) became a publicly traded company 53 trading days ago. The e-signature software provider made its May debut at $38 and then rallied sharply, to a $64 closing high the following month. After making its June high, however, shares quickly reversed direction and in just the next two weeks, retraced 50% of the initial 68% gain.

This took the stock price back down to the $52 area which is also the current location of the newly tracked 50 day moving average. At this nexus of 50 period technical point in both time and price, a bullish candle pattern has formed called a morningstar pattern.

A morningstar is a three period pattern consisting of a large down-day candle, followed by a narrow opening and closing range “doji” candle, and completed by a large up-day candle. It reflects a transition in investor sentiment from bearishness-to-bullishness, and often marks important lows in price.

In addition, there was strong positive volume and money flow in Thursday’s session and the stochastics oscillator has moved out of an oversold condition.

Docusign is a good risk/reward long trade at its current price using an initial percentage stop under the 50 day moving average.

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