One way to find a deal in the markets is to look for a stock that has crashed heavily in a short time frame. In some cases, there are gross overreactions to a company’s recent performance that send a stock crashing.
A great example of that is tech company DocuSign (NASDAQ:DOCU). The stock sank more than 40% after earnings this month out of concern that its guidance was simply too soft. The selloff has been so extreme that DocuSign’s shares now sit in oversold territory, with a Relative Strength Index (RSI) of less than 24. RSI looks at recent price movement – normally the past 14 days. And the lower the RSI number goes, the more of a selloff there is. When it dips below 30, a stock is said to be oversold.
Outside of this recent bearish activity, shares of DocuSign only briefly dipped into oversold territory in the past 12 months. And given that people aren’t rushing back to the offices (especially with another COVID-19 variant out there to worry about) plus many analysts still projecting lots of growth in the digital signature market, DocuSign isn’t the horrible buy that this latest trading activity suggests it is.
The company’s most recent quarter was its six straight period where sales were up by at least 40%. At some point, that type of growth is going to slow down, it’s only inevitable. DocuSign could be a gem to pick up right now as the business is still growing at a strong rate and its future remains bright.