by Serge Berger | March 18, 2014 8:06 am
From robot vacuum cleaners to a variety of military, warehouse and offices uses, iRobot Corp. (IRBT) carries a wide array of robotic products and is thus being closely followed by analysts and investors not only for industry trends, but also investment potential.
See, robots are making an increasingly meaningful contribution to our daily lives and have also made a number of big headlines recently. Companies from Google (GOOG) to Amazon (AMZN) to Cisco Systems (CSCO) are pushing into this frontier as technology has arrived at a point where both companies and households are showing willingness to adopt it on a mass scale.
For my part, I have monitored IRBT stock for a couple of years and have found a stock that lends itself well to the active investor and trader. Although iRobot can be a big mover, its moves for the most part respect technical analysis and thus its various support and resistance levels, allowing me to cleanly define my risk.
Just yesterday, IRBT once again made the headlines as it, alongside Cisco, announced the availability of a new robot called the Ava 500. The robot’s main task is telepresence, which allows for video conferencing with a whole new way of freedom.
Investors seemed encouraged by the prospects of this new product and pushed IRBT stock higher by 5.6% on the day.
As I mentioned above, in the grand scheme of things, this is not a big move for IRBT, which can easily move 5% on little to no news. However, Monday’s rally in iRobot has come at an interesting juncture on both its longer- and nearer-term charts.
On the below chart looking back to 2011, note that last year, IRBT stock struggled to overcome a resistance area around the $38-$40 level. After a failed breakout last summer, shares settled back into a trading range below the resistance area, which in January finally led the stock to break past resistance again and this time put more distance between itself and the resistance area.
Bigger-picture, IRBT now looks to be holding above the previous resistance area and ready to move higher in due time.
On the daily chart, Monday’s rally came after IRBT stock bounced off a nine-month support line and left behind a rather bullish-looking reversal pattern on the chart.
Considering that the current broader stock market is facing big headline risks from Ukraine/Russia to the U.S. Federal Reserve on Wednesday, I would like to see the stock confirm Monday’s rally with another up-day in coming days. Once this is established, the stock might again be ready to push past its early March highs.
Investors also have very clearly defined risks at last Friday’s lows near the $40 level, a drop below which would simply be bearish for the time being.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
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