From its first day of trading in January to its high on Sept. 9, shares exploded more than 500%. Holy moly, what a gain. But since then, Roku stock had trouble finding its footing.
That’s perfectly natural for a company that is still very much in “growth mode” and for a stock that had been so volatile. After all, in 2018 Roku cratered 66% from its fourth-quarter high to its fourth-quarter low.
Clearly, volatility hasn’t left the stock yet, either.
After hitting a high of $176.55 in September, shares were hammered down to a low of $98.08. That’s a 44% loss in just 14 trading days. Roku then rallied 72% to its November high, before falling 20% to current levels.
I don’t mean to shower readers with a bevy of percentages, but it’s important to emphasize that when the stock moves, it makes really big moves. Let’s look at the chart to see what kind of move could be next.
Trading Roku Stock
The daily chart above for Roku stock is admittedly busy. I like to take the keep-it-simple approach, but for a name as volatile as Roku we need to know our levels and trends.
That said, we can still keep it relatively simple.
For instance, buyers have generally stepped in to support Roku stock in the upper-$120s. In instances where the market has pushed the stock lower, the $117.50 to $120 area - which also includes the 61.8% retracement and August gap-up level - has been solid support (blue box).
On the upside, $150 has generally been a tough area for bulls to penetrate (black arrows). In instances where bulls broke through this mark, rallying past $170 has been a short-lived endeavor.
Since its September low, Roku has made a series of higher lows, riding an uptrend mark (blue line) higher for several months. On Monday, however, that trend mark gave way. With multiple downtrend lines in play (purple lines) and with shares below the 20-day, 50-day and 100-day moving averages, traders need to think about lower prices being in store for Roku stock.
I like Roku for the long-term secular trend of streaming video, but the short-term trends tilt bearish.
For bulls, there is simply too much “junk” overhead even if Roku is able to reclaim its prior uptrend. Until it clears $150, longs may have trouble gaining traction.
That said, a buy-the-dip scenario could be in play. Should Roku shares continue to trade lower, first see if the $127.50 area buoys the name. Below puts $117.50 to $120 in play, with the 200-day moving average just below.
If no support can be found, a retest of the $100 level may be in store, although it will likely need to come with a broader market correction.