$DOCU ... How to Trade Growth Stock 

"My basic principle of stock market investment is that the only valid reason for buying a stock is that it is rising in price.  If the price is rising, no other reason is needed.  If the price is not rising, no other reasons are worth considering"

"So while I continue to trade on Wall Street, I keep the market and it's emotional atmosphere at arm's length.  I do not want to know what people on Wall Street are thinking or saying.  I am not interested in the latest business forecasts, analysts' opinions, brokers' views or tipsters' gossip.  The stock tables tell me everything I need to know.  It is  what stocks are doing and not what people are saying  that determine my actions.  This has been a corner stone of my market approach and remains so today". 

By Nicolas Darvas (professional dancer and  self taught stock investor in the 50's)

Mr. Nicolas Darvas - a professional dancer and a self taught stock trader on Wall street, recognized 70 years ago that the institutions - hedge funds, pension funds, mutual funds and professional money managers that handled wealthy peoples monies were primarily responsible how the stock would perform.  That still holds true today.  Mr. Bill O'Neal (Founder of IBD Investors Business Daily) recognized this and developed some very basic rules of Investing in Growth Stocks.  As a retail investor that is looking for ways to Out Perform the Stock Market (using performance of  $SPY  as a barometer for general market performance), here are some very basic concepts that one needs to get their head wrapped around.  They may seem counter intuitive but it works.

• Buy  HIGH  and sell  HIGHER.
• Follow the lead of the  INSTITUTIONS.
• Learn to read the stock and index charts emphasizing  PRICE  and  VOLUME.
• Mitigate  RISK  and decrease the holdings during earnings report.
• Always buy something on a  FOLLOW THRU  day.
• Learn to  SCALE IN  as the stock trends with higher highs and higher lows.
• Learn to  SCALE OUT  when the stock approaches the 50 day sma (Simple moving average).
• Learn to harvest  PROFITS  when the stock attains a gain of  +20%  to  25%  from initial purchase.
• CONCENTRATE  your portfolio to just a few  LEADING STOCKS   in the   LEADING GROUPS.

$DOCU  has been one of the leading stock since the market had a  'Follow Thru'  day on April 2nd with the  $SPY  and April 6th on the  $QQQ.  Following are the details and my reasonings:

1. 9/6/2019 ... Stock breaks out at $54.78 resistance with 7 times the daily average trading volume.  Stock rises +18% within 14 days (Sign of institutional buying).
2. 1/30/20 ... Stock breaks out at $77.01 resistance with 3 times the daily average trading volume.  Stock rises  +19% within 3 weeks and peaks when the market peaks on Feb 19th.  RS  line reaches an all time high on IBD charts.  Stock had gapped up  +9%  on 12/6/19  in volume 3 times the daily average trading volume (confirmation of institutional interest in stock).
3. 3/12/20 ... Stock attained it's all time lows while the  $QQQ  (Growth Stock Index) continued to head lower for another 10 days.  Institutions were holding onto this stock and they kept supporting this stock.  RS  line was almost vertical at this time while the market was still correcting.
4. 4/3/20 ... Initial small starter position at $84.26 at the market open on  'Follow Thru'  day with the  $SPY.
5. 4/7/20 ... Second position at  $90.91  at the market open on  'Follow Thru'  day with the  $QQQ.  Initial starter position is already  +8%.  RS  line is at all time high on the IBD charts.  Stock is out performing the growth stock index.  10 day sma (simple moving average)is above the 21 day ema (exponential moving average) which is above the 50 day sma.  Stock never traded below the 200 day sma during  market correction.  Stock corrected  -25%  from its all time highs of Feb 19th while the  $QQQ  corrected  -28%  and the  $SPY  corrected a whopping  -34%.
6. 6/3/20 ...  Exit initial starting position at market open the day before earnings report for a gain of  +74.29%  (8.5 weeks in trade).  Follow the rules of harvesting profits and mitigating the risks of a nasty surprise with the earnings report.
7. 6/3/20 ... Left the second position of  4/7/20  at  $90.91(+62.19% gain)  to ride thru the earnings report on 6/4/20.  
8. 6/5/20 ... Reenter the position the day after earnings report at  $139.82.  Stock never violated the faster moving 10 day sma during earnings day.
9. 6/12/20 ... Additional position was initiated at  $163.  Stock has been trading tightly and very orderly for the past week around 163.  It will be a component of the NASDAQ - 100 when the market opens on Monday 6/22/20.

Institutions usually commit billions of  $$$   when they target a certain group of stocks.  It's quite normal for them to invest in a whole bunch of stocks that are in the same group of stocks.  Currently  $DOCU  is in the same group of stocks as:

$AUDC

$BAND

$COUP

$DDOG

$DT

$NOW

$PAYC

$PCTY

$SHOP

$WDAY

$WIX

$ZM

If some of these names look familiar to you that is because they have been mentioned in my blog posts or they were discussed at the monthly local IBD Meetup group meetings in the Tampa Bay area.  Some of these stocks need to consolidate and allow the 50 day sma to catch up to the 21 day ema.  It could provide another opportunity to get into these stocks with initial small position or an add on second position if you already have a position in them. 

Happy Trading!

Amin