
Trade Update: Take 8% Profit in Fitbit Stock
Shares of wearable fitness device maker Fitbit (FIT) - Get Report have climbed more than 8% since my last take, rising from around $13.62 per share to its recent high of $14.73. That mark is just shy of my prior price target of $15.13, and taking profits in Fitbit stock now looks like the smart play.
Fitbit stock closed Monday at $14.57, down 0.21%.
The company is facing a class action lawsuit on allegations that its popular heart-rate trackers are "highly inaccurate." Fitbit Surge watches and Charge HR bands were used by researchers at the California State Polytechnic University, who tested 43 healthy adults using Fitbit's PurePulse heart rate monitors. The study concluded that its products don't accurately measure a user's heart rate.
That study alone doesn't signal the end of Fitbit, but any fines and or penalties related to the suit could be a potential setback. So why take the chance? Additionally, the company recently issued second-quarter guidance that spooked investors about possible slowing growth. It didn't seem to matter that Fitbit actually beat on both the top and bottom lines for the first quarter.
The stock is down 50% year to date, compared with a 0.2% rise in the S&P 500 (SPX) index. And with both the company's fundamental and technical metrics under pressure, it's time to take the recent gains and find stocks with better growth prospects.
Take a look at the chart below, courtesy of TradingView.
Despite the recent 8% rise, Fitbit stock still looks broken. It is trading below its critical moving averages. Fitbit stock will need to break resistance back above $15.51 (the gray arrow) to stay out of bearish territory, which is defined as a stock that is 20% below its 52-week high. Fitbit is down 72% below its 52-week high of $51.90.
The beaten-down share price and the recent attacks on the accuracy of its product will likely attract more short sellers to a stock that already has a high percentage of shares sold short -- around 31% of its float.
While I was right to predict the stock's upward bounce, that bounce didn't come with the conviction I expected in terms of a spike in volume. Fitbit's average daily volume for the last three months has been 9.8 million shares traded per day. During its recent bounce, the stock has average daily volume of 6.3 million shares per day, or about 35% below its three-month average. This could mean investors are losing interest.
The chart suggests that Fitbit stock could retest support at $13.52 and possibly $12 per share in the near future.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.










