Here’s my take on Coupa Software ($COUP) (September 04, 2019)

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COUP 

I want to look at Coupa Software ( NASDAQ: COUP ) today. This was a stock that we had had on our Growth Stock List, which is a list of companies with really, really solid fundamentals in the ways that matter; meaning growing and accelerating growth in revenues as well as earnings and with charts that are awesome too. You have got to have good charts, otherwise why even look at charts if you are going to let the fundamentals dictate what you are going to do? Those of you that do let the fundamentals dictate what you do without looking at charts, well, you are probably not watching this video, if you are try looking at charts, you will make more money.

With Coupa ( NASDAQ: COUP ) I had to take this off. We had taken it off right when the stock started to come back here, we just had to take some profits. And then when it was down here I put it back on the list and said, “Okay, let’s add it again.” The stock comes up a little bit and then finally, yesterday, before the reported earnings it was back down below the 50-day moving average, basically right at the level at which it was put on the Growth Stock List just a few weeks earlier, right? And so did I suggest to my members to hold it over earnings? The answer was, no.

The reason that I said, “No, you can’t really hold it over earnings,” wasn’t because I thought the stock was going to fall down and then now I am bummed because I was wrong. No, it was because I didn’t know which way it was going to fall and we didn’t have a profit cushion. If we had held the stock all the way through, which again, we didn’t, I forget where we bought it but let’s say we bought it at $100.00, whenever that was. Now the stock runs up here about to 150.00. It comes back down to 135.00 or something like that, but we think, hey, this is a pretty good company I think I am going to hold over earnings. What you do is, you hold half over earnings. You sell half of your position and take profits that way if the stock implodes you are still okay because you sold half.

On the other hand, if the stock gaps up and moves higher, and this is up like 10 percent at the open, then you are happy that you kept some. So you are happy either way. This is something that Mark Minervini talked about in one of his books, how you always take half. Don’t sell a one-third or three-quarters or something, take half, that way you know you are happy either way. But here Coupa ( NASDAQ: COUP ) gapped up, it actually ran a bit above 150.00 for a while and then fell back.

So what are we going to do now? Look, earnings were great, they blew out to the upside, and everything was good. If you look at these big green bars here, this is the tallest bar but there was one a few months ago on this earnings move as well and look what happened to the stock, the stock kept going. So we see these green volume bars, and the same thing back here and even here. The big bars are the green ones. And so what I am looking for here on Coupa ( NASDAQ: COUP ) is higher prices.

I think this stock is still going to go higher but it is still in a base right now. It is still in a base so I think it is really dangerous to buy the stock here. I think you have to wait it out. Hopefully, you will get a gift and the stock will kind of trickle back down for a while. Watch how the 50-day moving average trades. If the stock can come back and test the 50-day moving average then you wait for the first little rebound, that’s when you are buying the stock. And then you are keeping a stop just a little bit below your entry point, just a little bit below the 50-day moving average. That’s really the way you are going to want to trade it. You are going to wait for it to pull back and then keep a pretty tight stop.

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