The company beat on earnings per share and revenue expectations and raised its outlook. Even in a tough tape where the markets are under pressure over trade worries, Roku stock is putting in a 20%+ post-earnings rally. This follows up a similar gap-up reaction to its prior quarter in February.
It's got a lot of angry short-sellers scratching their heads on why this stock keeps going up. Give this top takeaways story a read, which will shed to some light as to why Roku stock keeps on ramping.
When Roku beat earnings in February, the stock went from $51 to $74 in just a few weeks. That came after a near doubling off the December lows to begin with. Shares are now up three-fold from those lows, but that doesn't mean more upside isn't there.
Trading Roku Stock
The daily chart above shows Roku stock breaking out over short-term channel resistance (blue line) and bursting through prior resistance (black line). The stock is now technically overbought in the short term, but as we've seen many times in many different stocks, that doesn't mean much. Roku stock may remain overbought for days or even weeks, depending on whether shorts continue to cover (many surely had stops at $75, just above the prior highs) and if buyers continue to accumulate the name.
The question becomes, where can the stock go from here? Let's look at those levels on the weekly chart below.
When mapping out the levels above, there are a few target zones that immediately stand out. First, we could pullback. Should Roku stock begin to give back its gains -- say there is no trade deal and the markets really fall apart next week -- then look at $75. This level has been resistance twice since September and Roku is now firmly above it.
Look to see that this former resistance level becomes support. On the flip side, shares are not yet overbought on a weekly basis and there finally seems to be belief around Wall Street that last quarter's beat wasn't a one-off fluke. Roku's business momentum is real and that may transfer to the stock.
In that case, Roku stock could rally to channel resistance (blue line). That would put shares around $92 to $95, but it may take some time to get there. Keep in mind the stock already closed higher by 28.1% to $83.17 on the day.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.