DOCU's 80-day moving average is historically a bad omen
Ahead of its second-quarter report, the shares of DocuSign Inc (NASDAQ:DOCU) are up 2.2% at $52.81 this afternoon. Despite today's pop, DocuSign stock just touched a historically bearish trendline, and it typically underperforms after earnings.
Digging deeper, DOCU just came within one standard deviation of its 80-day moving after the broader-market's August rut pushed it well below the trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, seven similar signals have occurred during the past three years. The stock moved lower in the ensuing month in 86% of those instances, averaging an 11.1% loss. From its current perch, a move of similar magnitude would put the shares below $47.
The equity has been underperforming, down 5% in 2023. The aforementioned $47 area is the home of two major pullbacks for the stock this year, once in early May and again in late August, with an an eight-month low close of $46.66 occurring on Aug. 24.
Circling back to earnings, the e-signature developer will report quarterly results after the close on Thursday, Sept. 7. Over the its past eight quarterly reports, five of DOCU's post-earnings sessions were negative, including a 22.9% drop after the company's March call. The security averaged a next-day return of 17.5%, regardless of direction, though the options pits are pricing a slightly smaller move of 15.3% this time around.
Options traders are weighing in ahead of the event and bears are overtaking bulls, with 16,000 puts and 15,000 calls traded so far today. New positions are opening at the top six most popular positions, led by the weekly 9/8 52-strike put.
This denotes a shift in sentiment, and a further unwinding of optimism could weigh on DocuSign stock. For context, the security's 50-day call/put volume ratio of 2.30 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks higher than 98% of readings from the past 12 months.
What's more, the stock looks like a potential premium-selling candidate ahead of earnings, per its Schaeffer's Volatility Scorecard (SVS). With a score of just 5 out of 100, the security has consistently realized lower volatility than its options have priced in.