Shares of wearable and mountable camera maker GoPro Inc (GPRO) rallied another 9.36% on Monday after a huge post-earnings jump last Friday. In the bigger picture, GoPro stock has developed a good four months of trading history that traders can reference, and the resulting breakout of this rally looks like it could send this stock even higher into year’s end.
GoPro earnings came to 12 cents per share to beat analyst estimates of 8 cents. Revenues of $280 million topped the consensus expectation of $264 million. However, most importantly, GoPro’s fourth-quarter outlook surprised to the upside — its expected sales range of $550 million to $580 million trumped the $500 million estimated by analysts. Meanwhile, GPRO sees earnings coming in at 65 to 69 cents per share, which is far better than the 53-cent expert estimate.
Analysts responded to the good news by upping their price targets. For instance, Wedbush maintained its “outperform” rating but raised the price target for GoPro stock from $81 up to $98.
GoPro Stock Charts
Looking at GPRO’s trading history since its June 26 IPO, we have three defined moves that confirm a near- to medium-term bullish tilt in the stock:
- First, after an initial rally out of the gate in June, GoPro stock settled into a two-month sideways pattern until finally releasing higher on Aug. 28.
- The stock then climbed, and in mid-September, GPRO consolidated for a couple of weeks before resuming the uptrend.
- After double-topping in late September/early October, GoPro stock then moved into another consolidation pattern, which finally resolved higher with the rally from last Friday and Monday.
Because GoPro stock still doesn’t have very much trading history in the bigger picture, we have to use nearer-term moving averages, such as the 8- and 21-day simple moving averages (blue and yellow lines, respectively). The most recent rally has pushed the stock marginally back above both of those moving averages, which from a momentum perspective — and within the context of a breakout of a multiweek consolidation phase — is a bullish sign.
On the closer-up daily chart, note that GPRO last Thursday developed a bullish reversal day, where the stock rallied off the lows and closed near the highs of the day, just before the earnings announcement. This bullish reversal was confirmed the next day as GoPro stock rallied about 18% after earnings, marking the daily chart with a bullish breakaway gap.
Monday’s follow-through buying marginally pushed the stock past its Oct. 22 intraday highs, and that move has set the stock up for more gains through the end of the year.
Active investors and traders could look to buy GoPro stock around the $84 area for a move back to the early October highs in the high $90s and using the $76 area as a stop-loss.
Remember, GPRO is a volatile stock, which is to say that position size needs to be adjusted accordingly (smaller) and stops must be widened.
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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.
