Shares of robotics maker iRobot Corporation (IRBT) are higher for 2014, but remain well off their highs from the spring. However, after the company’s most recent quarterly results and a healthy technical consolidation period, IRBT stock looks ripe to give traders and investors some holiday cheer.
On Oct. 21, iRobot reported earnings of 48 cents per share, up a whopping 85% and better than analyst estimates by a healthy 15 cents. Revenues came in at $143.5 million, which was 15% higher and also better than the Street consensus. The good news was further bolstered by an announcement the day before, in which IRBT said it scored a big sale from the Naval Surface Warfare Center worth $7.6 million.
Then on Tuesday, Dec. 2, JMP Securities initiated coverage on IRBT stock with a “market outperform” rating and a price target of $50 — some 37% higher than current prices.
As we will see on the charts below, the post-earnings results consolidation period increasingly looks to be resolving to the upside as the positive headlines for the stock keep rolling in.
IRBT Stock Charts
Looking at the multiyear weekly chart of IRBT stock, we see that after a strong run from 2009 into spring 2011, the stock began to stall and form a resistance line in the sand around the $38-$40 area. After forming an important higher low in 2012, the stock rallied again and in early 2014 overcame the aforementioned line of resistance, only to drop back below it later in the spring. So in the bigger picture, iRobot continues to struggle overcoming this key resistance area on a sustainable basis.
However, bulls will point to the fact that IRBT stock held support near the $30 area three times since late 2013, most recently again in September, and the stock is now pushing up against the diagonal resistance line stretching back to early March.
Zooming in on the daily chart, we see that IRBT stock gapped higher and rallied about 14% on Oct. 22 after the earnings announcement. While this rally confirmed a double bottom formation from September/October, the stock then quickly settled into a sideways consolidation period that continues to this day.
Active traders and investors now have a clearly defined risk range to focus on, where a break higher past the $36.60 mark on a daily closing basis would qualify as a breakout and could push IRBT stock higher as continuation buying comes in. Also note that the near-term moving averages (eight- and 21-day, blue and yellow lines, respectively) are currently supporting the stock nicely, coupled with the Stochastic Oscillator that is increasingly pushing higher.
Look to buy IRBT stock on a daily lose above $36.60 for a move into the $39-$40 area.
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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.
