In this report we analyze: Roku, Microsoft, Docusign and BigCommerce

Please note the glossary of terms and techniques here and herehere and here

You can access our portfolio here. You can also track in real time our Buyshere. You can also track in real time our Buys/SellsSells/Portfolio Activity in the Portfolio Activity in the forum.

If you want to track us in real time, we recommend that you set up alerts to these 3 topics “Portfolio Activity”, “Buys,”  and “Sells” which can be done by clicking on their icon/image, or search for their name in the search bar. Then, click the follow button and it will turn red like the image below.

The setups we outlined in Netflix, AMD and Teladoc last week are still active. You can access them here.here.

Roku (ROKU)

SummarySummary

• Even though Roku is 16% off its high, the force behind the drawdown is not strong. Volume is light, and smart money is not selling.
• If $150 breaks, we will target the $144-$140 region.
• We will also look for the 37 mark on the RSI for a bottom, as well.

After breaking out at the $175-$176 region, Roku fell back below this major resistance, confirming a false breakout. We stopped out of our recent tranche in an attempt to play this breakout, and currently setting up our next plan to buy more shares for our long-term position.

Roku is currently down 16% from its highs and found support at the $151-$150 price range. Also, note the blue trendlines. These are Anchored Volume Weighted Average Prices (AVWAP)that are tied to the major swing lows within the recent uptrend. This tool helps determine the health of a trend and also determines key supports for when that trend changes.

Roku found support at the June 29th AVWAP and is currently holding this price. Even with a 16% correction, these AVWAPs show we are still in a healthy uptrend.

Further signs of strength can be found in the volume. Notice how the volume trend has been decreasing with the selling. This is telling me that the drawdown is not backed by excessive selling, but more of a lack of buyers.

The Accumulation/Distribution line supports this. Note the lower lows while ROKU’s price makes higher highs. This is not what you want to see prior to a breakout; however, note how that lows in the A/D are moving higher. This is confirming that even though “smart money” is not buying, they are also not selling.

For the sake of simplicity, if Roku breaks the $150 support, it will confirm a downtrend is in place. If this happens, my targets are from $144 – $140. The question will be – how low does price have to go before the smart money steps back in? It’s not at $150, so we will likely look lower for a bottom.

The RSI will also be key for finding a buying spot. With no positive divergences showing up on the daily chart (or hourly), we will look to the 37 mark for a bottom. This has been major support in the RSI throughout Roku’s history. If the RSI finds this support while price is also on a key support, that will be a buy for us.

The long-term chart lines up with the fundamental thesis here. We are long-term bulls, and will use this period to further accumulate shares in one of our favorite stocks.

Microsoft (MSFT)

SummarySummary

• After crossing the $220 resistance, Microsoft invalidated the possibility for a large degree downtrend that we have been tracking for several weeks.
• This is great news for the long-term outlook for MSFT and the market. However, the chart suggests we are now in the 2nd wave, which could be rough in the short-term.
• We will be buyer in the $192-$185 region.

We’ve been tracking Microsoft extensively this year. I suggest you look at my deep dive into the long-term chart to get an idea of the trends at play. You can access that here. We’ve held off on buying MSFT into this rally because of the risks we outlined below the $218-$220 price. Below here the slight possibility for a larger than normal downside setup was on the table.

As of now, there is good news and bad news with Microsoft from a technical perspective. The good news is that this large downside setup has been invalidated once MSFT crossed the $220 mark. For the long-term prospects of Microsoft (and the market), we are expecting higher levels once this correction plays out.

Furthermore, the 5 wave move off the March low is arguably the most classic example of a standard 5 wave pattern that I’ve ever seen. For example, the most common extension for the 3rd wave to end is the 161.8% extension, which for MSFT was around $213. We then look for the 4th wave to end around the 23.6% or 38.2% retrace of the 3rd wave. Microsoft’s 4th wave ended at the 23.6% retrace exactly. We then look for the 5th wave to end at the 200% extension with the MACD showing negative divergence. For Microsoft, the 200% extension was $232 with the MACD diverging. If I was going to teach someone how Elliott Wave mapping works, I’d start with this 5 wave pattern because of how text book it is.

Now for the bad news – what follows the 1st wave is the 2nd wave drawdown, which we have been planning for. If you look at the downtrend in MSFT, we have a clear A wave with a B wave that followed. It then gave way to price just briefly making a lower low, which is key. If the downtrend was over, we would’ve looked for a retest of the recent low and a hold above it, setting up for a move up. Once Microsoft breaks the $201 region, the C wave will be in play.

I’ll target the $192-$185 region for entry. This is a heavy confluence of important prices as well as the symmetrical move for this correction, which we’ve used successfully to get shares of many stocks in corrections close to their lows. There is also an open gap at $192, which should lead to a bounce.

Also, the Anchored Volume Weighted Average, which I anchored to the low in March, will be in this region this week. This is the best gauge for testing the health of an uptrend, and even with this pullback, the bulls are still in control according to this indicator. Expect heavy buying in this region, which we will participate in.

Docusign (DOCU)

SummarySummary

• DocuSign is down 35% from its all-time high, and just broke another key support at $205.
• The largest volume spike in its history happened at all-time highs, setting off a wave of selling.
• The structure suggests that the large degree 3rd wave is over, which puts the 4th wave targets at $185 – $140.

We outlined our plan for buying DocuSign in the forum last week, which you can access in the DOCU topic. Since the March low DocuSign has been in a clear 3rd wave. Third waves are powerful trends, which anyone invested in DocuSign since March is aware of. It has returned nearly 350% since the March low before hitting a top $6 below our target price at $298.50.

Confirmation that the 3rd wave is over and that we are now in the large degree 4th wave (in red) comes from a few signals:

• Notice the massive volume spike. This is the largest move in volume in DocuSign’s history, and it’s predominantly selling. This means a large number of buyers have sold in unison, reducing the demand for shares. We will need buyers to step back in to stop the correction, which hasn’t happened even after a 35% drawdown.
• Price has closed below the 55-day EMA
• The RSI is clearly below 50 and holding, indicating that momentum has shifted to the downside.
• Price closed below the key support of $205.

For DocuSign, the most common targets for 4th wave supports are at the $185 for a shallow 4th wave and $140 on the deep side. The AVWAP, tied to the March low in blue, appears to be moving into the $185 region while the 200-day SMA is moving into the $140 region. The momentum indicators will be crucial for determining supports. They have their own support regions that I will be following, as well. We’ll be looking for signs of a bottom while both are hovering around key supports.

We started buying at $205 of Friday, and will be heavy buyers at the $185 region if we get there.

BigCommerce (BIGC)

SummarySummary

• BIGC is in a deep drawdown.
• It broke the $80.60 support, and thus means there is likely more downside ahead.
• Until price gets into the mid-$70s, the valuations are just too rich compared to other fast-growing stocks we own.
• The structure is unfortunately setting up for two extreme scenarios – either we are in a deep 2nd wave, which will give way to a strong 3rd wave to new highs. Or, we break to all new lows (below $64), at which point the price structure could be setting up for an even deeper drawdown.

We’ve been tracking BigCommerce since it topped a few weeks back. So far, it has been in a complex series of symmetrical corrections. My chart above outlines this path, and it assumes that BIGC is in a 2nd wave correction. This implies that the recent uptrend was it wave 1, which actually lines up well.

The problem with BIGC is that there is no indication that the correction is done. The second wave can go as low as the all-time low and still be valid, but this is an additional 25% from current prices. Furthermore, until it gets into the mid $70s, from a P/S standpoint in the E-commerce space, it’s not worth the risk.

Also, note the AVWAP, which I tied to important swing highs in the downtrend. Until BIGC stops making new lower highs, and starts taking back some of these AVWAPs in blue, the trend will remain down.

If BIGC can continue into the $70s and show some sign of bottoming, then we may take another shot at BIGC with stop just below the all-time low. If the price breaks to new lows, we will step away.