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Roku Stock: Buy the Dip or Stream Away?

Roku stock tried to bounce on Thursday, but the post-earnings sellers are keeping this one down. Here's how to trade it from here.

With the market again running higher, Roku stock was under early pressure due to a bearish post-earnings reaction.

At this writing the stock is down 8.4%.

Despite growing sales more than 50% year over year, Roku missed analysts’ expectations. While it delivered a solid bottom-line result, it was a mixed quarter overall.

It was not the blowout growth results we have gotten used to seeing from the San Jose, Calif., streaming major.

In any regard, bulls are wondering whether this dip is worth buying with the stock down about 40% from its all-time highs.

There is a worry about Amazon  (AMZN) - Get Amazon.com, Inc. Report, Alphabet  (GOOGL) - Get Alphabet Inc. Class A Report  (GOOG) - Get Alphabet Inc. Class C Report and others taking market share. But with the stock down this much from its highs, it’s worth wondering whether those concerns are priced into the stock.

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Trading Roku Stock

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Daily chart of Roku stock.

Daily chart of Roku stock.

Roku stock bottomed in May at the same time the bear market in growth stocks came to an end. Unlike most of its peers, it was one of the few growth stocks that went on to make all-time highs.

After initially opening below the October low, Roku gave day traders a great reversal opportunity before fading back below last month’s low at $293.90.

Now it's down in the demand zone — highlighted by the purple box on the chart — and it’s hard to get too bearish on this stock. Simply put, how low can it really go?

Above $293.90 and bulls can justify being long. Otherwise, investors need to be aware of some of the downside levels.

For instance, the 21-month moving average could be an area of interest, much like we saw with Twilio’s  (TWLO) - Get Twilio, Inc. Class A Report post-earnings slump.

That measure lines up well with the 2021 low, down near $272.50. So if Roku stock remains below $294, this area could be in play.

Back above $294 and $300 is on the table, followed by plenty of declining moving averages. Over the 50-day moving average and $350 is possible.