How to Trade Roku as Shares Stream to All-Time Highs

Roku shares have ripped ahead over the past two days, hitting new all-time highs in back-to-back sessions. Let's look at how the chart is setting up.
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I guess Roku  (ROKU) - Get Report wants to give Tesla  (TSLA) - Get Report a run for its money.

On a market cap basis, that won’t be possible. However, Roku knocked on a $50 billion valuation on Friday, as Tesla surged past $800 billion.

Both have become a favorite among bulls. Investors continue to squeeze these names higher.

Roku stock hit an all-time high Thursday and extended those gains on Friday with a sizable rally. The move came on news that Roku is buying Quibi’s content library.

From the November low to today’s high, Roku has a bit more than doubled. Tesla is up 123% from its November low. 

Trading Roku Stock

Daily chart of Roku stock.

Daily chart of Roku stock.

After bottoming in March, Roku enjoyed some very steady gains. The stock would rally, then consolidate for a few months.

Even in the fourth quarter, we saw a series of rallies and consolidations. But once Roku broke out over $250, the stock has been on a massive run.

While the shares corrected to the 10-week moving average, its visit was short-lived before it blew through $360 resistance and the 261.8% extension (measured from the March low to the 2019 high).

With Friday’s rally, the stock is pushing toward the three-times range extension from that measure and the 361.8% extension from the March low to the February high.

Don’t let the extensions bog you down too much. It’s not an exact science -- it just provides a guide.

If the rally can continue, I would look for a push above $413. Above that and the $430 to $450 area is a potential target zone in the short term. 

Obviously once this stock has time to base and consolidate, a higher area is possible.

On a dip, I first want to see how $360 holds as support. This was resistance in December and a major breakout point this week.

If Roku holds this level — as well the 21-day moving average — then bulls likely remain in control.

If Roku gets caught up in a marketwide selloff, though, the 10-week and 50-day moving averages are not out of the question, even though the latter is below $300 at this moment.

Remember to stay humble and reasonable after large rallies such as this.