The Clouds May Be Clearing for Coupa Software

Jun 06, 2022 | 08:18 AM EDT

Stocks quotes in this article:

Coupa Software ( COUP) , a cloud-based provider of business spend management solutions, is set to report its latest earnings results after the market close on Monday. In our March 15 review of the stock we recommended that, “The price of COUP may be extended or oversold on the downside but that is not enough of a reason to suggest a trade from the long side. Continue to avoid purchase of COUP and wait for signs of a bottom.”

With earnings due out Monday let’s check on the charts again.

In the daily bar chart of COUP, below, we can see that the shares continued lower into early May before some sideways price action unfolded. Prices are still trading below the declining 50-day moving average line but the distance below the line has been narrowed. The slope of the slower-to-react 200-day moving average line is negative and prices are extended (oversold) below this indicator.

The On-Balance-Volume (OBV) line made a low in March and this indicator has not broken that even though prices have broken their March lows — a subtle bullish divergence.

The 12-day price momentum indicator or study has been making higher lows since December and that is a more important and significant bullish divergence. This six-month divergence is more likely to foreshadow a price rally than a shorter divergence.

In the weekly Japanese candlestick chart of COUP, below, we can see some positive developments in May. There is a hammer pattern followed by three spinning tops that tell us there is a balance between bulls and bears. After the long decline that COUP has suffered from early 2021 these are welcomed clues of interest from farsighted investors. Prices are extended below the declining 40-week moving average line and that can be a buying opportunity, according to some of Joseph Granville’s trading rules from the 1960s.

The weekly OBV line is pointed down but shows the start of some “steadiness” in May. The 12-week price momentum study shows higher lows from January as the pace of the declines has slowed.

In this daily Point and Figure chart of COUP, below, we can see a potential upside price target in the $92 area.

In this weekly Point and Figure chart of COUP, below, the X’s and O’s point to a possible target of $98.

Bottom-line strategy: I have no special knowledge of what COUP will report to shareholders and analysts on Monday but the charts and indicators suggest that the long decline in price is in the rearview mirror and a recovery rally could soon unfold. Aggressive traders could probe the long side of COUP at current levels risking a close below $60. The $98-$100 area is our initial price target.

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