Fitbit Inc (NYSE:FIT) — Shares of FIT stock have dropped 5.5% in the past two days after details about the company’s next two fitness band launches were leaked. While investors did not seem excited about the new products, the resulting pullback looks like a buying opportunity based on the stock’s positive technicals.
S&P Capital IQ Equity Research rates FIT stock a “Hold,” but its analysts have a price target of $17 on shares, which is more than 16% above the current price. Capital IQ expects a 39% increase in sales this year and another16% next year. On the earnings front, it forecasts operating EPS growth of 55% in 2016 to $1.07 and another 22% in 2017 to $1.42. Overall, its analysts say Fitbit is well-positioned to benefit from positive trends in the health and fitness market.
Turning to the chart, we see that FIT stock declined from a high at over $51 in August 2015 to a low under $12 in late June. From there, shares reversed their downtrend with double buy signals from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR).
The recent rally has come in several steps with the bottom of each correction being signaled by a CBR buy. The most recent CBR buy signal occurred on Aug. 2, at $13.98, and it was a special situation. The reversal following it was accompanied by very high volume, and since then, FIT stock has formed a resistance line at $16.
The current sell-off should offer traders a chance to buy FIT stock under $14.50 with an initial target of $16. If successful, this would result in a return of more than 10%. However, it is possible that the resistance line may be pierced. In this case, we could see shares run all the way to $18 for a nearly 25% profit.
