The following charts are weekly views with 10ma and 40ma plotted. All will be the focus for new trades for the coming week and represent potential new initiations, positions that have already been established (but remain within buying range) or add on opportunities.
(Click any chart to enlarge)
DocuSign (DOCU) breakout failed on a poor reaction to earnings on Wednesday. Despite a 2 cent surprise and 33% sales growth, investors may have had higher expectations for future growth (specifically internationally). Revenue guidance was raised and most analysts were positive on the reports with multiple price target increases (JPM from $70 to street high $88, Piper Jaffray from $62 to $67 and JMP Securities from $63 to $68). I didn’t find any red flags in the reports, I simply believe the red flag was the expectation given the prior run. Forward looking EPS estimates for 2019 currently at 16 cents, and even at +220%, the stock isn’t cheap. Perhaps, price here got a little ahead of itself in the short run but there’s no doubt in the growth potential and DOCU basically is the entire space of an estimated $25B market. I know, I know… enough already, what’s the trade. The initial idea is to use a reclaim of the weekly 10ma as an early entry technique, especially if it comes on a +volume move and the market finds its footing. However, recent weakness in tech may not yet be resolved to the downside and too early of an entry here is also known as being wrong. So additionally, on continued weakness and especially on a shakeout below $50, I really like the idea of a potential shakeout+6 entry with 56.06 as the pivot on the way back up. Either way, looking for longer term upside in DOCU and eventual new highs.
Five9 Inc. (FIVN) has formed a three weeks tight pattern with a 49.50 standard pivot. I’ve been in and out of this name a few times in 2018 and will patiently stalk another entry here. A bit extended, the stock has been hot following a 7 cent earnings beat last quarter on +28% sales growth. Funds have been stepping in here as the ownership number has grown to 358 from 305 this time last year. Looking forward, EPS growth of +35% next year with estimates on the rise and computer software among one of the strongest market groups with TWLO, BAND, CRM and COUP as running mates. I don’t make a habit of purchasing extended stocks, but when I do add or initiate, the 3 weeks tight pattern is a favorite setup. Additionally, short float here has risen to 5.5%, and with 4+ days to cover, a potential squeeze may add some fuel to a breakout. Speaking of CRM, same pattern can be found there.
P R A Health Sciences (PRAH) has formed a base on base pattern with a 108.02 standard pivot. Stock handled the recent secondary offering well and found support off the 10ma. A+ rated group with strong peers including MEDP, ILMN and TECH. Earnings growth of +27% in the recent quarter on sales growth of +35%. Number of funds participating now at 587 from 498 this time last year and climbing the past three quarters. Forward EPS growth a little light at +16% but those estimates have been on the rise.
There’s not much else on my radar into tomorrow as my short term indicator remains red; however, most of the setups from last week’s post remain valid and on my focus list… MTCH, CARG, ECHO and NOW.
Disclaimer: None of the presented content represents individual investment advice to buy or sell securities and the information provided is solely for informational, educational and entertainment purposes. Author has no position in stocks mentioned at the time of this writing.