DOCU has plenty of technical support in place
Subscribers to Schaeffer's Weekend Trader options recommendation service received this DOCU commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.
Software stock DocuSign Inc (NASDAQ:DOCU) has moved steadily lower since its early December two-year high, which it hit after a post-earnings surge. The recent pullback brought it to several layers of technical support, however, including the ascending 50-day moving average. This trendline is just above the $87 level, which three times the stock’s initial public offering (IPO) price and served as pre-earnings resistance in late November.
Though the 20-day moving average rejected price action in recent sessions, the shares have still made a few moves above it. With all of this in mind, now looks like a good time to bet on DOCU’s next leg higher.
Though shorts have been in covering mode since the stock’s October peak, short interest still represents 4.5% of the stock’s available float and is 60% above last year’s short interest trough. This leaves plenty of short covering potential.
Despite DocuSign’s blowout earnings report, two-year high, and roughly 46% year-over-year gain, analysts are mostly bearish. Of the 23 brokerages in coverage, only four carry a “buy” rating, with the rest a “hold” or worse, and a shift in sentiment could give the shares a boost.
Our recommended call option has a leverage ratio of 6.2 and will double on a 16.1% rise in the underlying security.