DocuSign: Wait for the Dip, Sell the Rip?

DocuSign has roared higher in 2020, but can it keep up with a move to its highs? Let's look at the chart after the company reported solid earnings.
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Not all the pandemic stocks are getting crushed on earnings. Just look at DocuSign  (DOCU) - Get Report, up about 5% on Friday after better-than-expected earnings.

There were concerns about how DocuSign would perform even with a strong quarterly report.

Those concerns were exacerbated earlier in the week when Zoom Video  (ZM) - Get Report reported strong earnings but saw its stock price fall 15%.

It’s not perfect for DocuSign, either. Shares were up as much as 10.8% at the session high, although Thursday’s 6.1% pre-earnings rally likely made it hard for bulls to maintain full momentum.

In any regard, a solid quarter and an upbeat outlook has been taking shares higher. It's got analysts cheering the results, too.

Now the question is whether DocuSign take out key resistance.

Trading DocuSign

Daily chart of DocuSign stock.

Daily chart of DocuSign stock.

Shares initially burst higher on the day, hitting a high of $256. However, the stock faltered near $250 resistance.

That rejection keeps $250 relevant as resistance and will now be a key focal point for the bulls.

DocuSign turned in a great quarter and the company has done very well this year. However, there are concerns on how the stock will perform when the pandemic unwinds and as a vaccine allows the economy to open up more broadly.

While it seems like DocuSign's services should prevail due to convenience and efficiency — and that may very well be true — it doesn’t mean the stock will behave the way investors want.

From here, let’s see if shares can reclaim $250. Above puts Friday’s high in play at $256. A move over the 78.6% retracement at $268.18 opens the door to the all-time highs up at $290.

Above the highs and $300-plus is in play.

On the downside, a move below $240 could trigger a gap-fill from the earnings rally. Below $230 and bulls will want to see DocuSign hold the 50-day and 100-day moving averages, currently between $215 and $220.

Below that could put $200 in play, followed by range support between $185 and $190. If range support is in play, it’s possible DocuSign tests its 200-day moving average.

From here, let’s see how $250 treats the stock.