Editor’s note: Tyler Craig is filling in for Sam Collins today. Sam should be back on Monday.
GoPro Inc (NASDAQ:GPRO) shares have finally decided to participate in the long-running bull market. Nevermind that it took them umpteen months to grow a backbone and tell sellers enough’s enough. And nevermind that it had to drop an account-breaking 91% from its peak before a bottom was ultimately discovered.
Still, what’s done is done. The baton has finally been passed and GPRO stock lovers are off to the races.
From the mid-May low, GoPro stock has essentially doubled in price. Sure, it remains a far — indeed desperate — cry from the heights seen during the halcyon days of late-2014. But all grand recoveries have humble beginnings.
The budding bull trend has a number of things going for it. First, the ongoing ascent isn’t some fly-by-night snap-back rally born of deeply oversold conditions. No, this pup was born after a long base — one which hopefully marked the end of GoPro’s harrowing bear market and the beginning of a new age.
I’m talking about the trading range kicked off in January that saw GPRO shares ping pong between $9 and $14 for months on end.
Second, the stock has now reclaimed the higher ground, that coveted land north of all major moving averages. It’s the first time GPRO has been this far above its 200-day moving average since last fall. Provided the stock remains above this pivotal average (currently perched at $12.75) the hopes for continued upside remain alive.
Third, the volume indicator has turned decisively bullish this summer. Accumulation days litter the landscape, suggesting GoPro’s newfound uptrend has big backers.
The GPRO Trade
GPRO has formed a bull flag over the past week due to mild profit taking. While further chop may be in order, this setup has bears watching. I suggest a break above $17.35 to signal the next upswing is upon us. If you’re a stock trader, consider buying shares. Option traders should check out naked put plays. The implied volatility for GPRO options is elevated, creating juicy premium selling opportunities.
You can sell the Oct $14 put right now for around 35 cents. The reward is limited to the initial credit and will be captured if GPRO remains above $14. By selling the put you are obligated to buy 100 shares of stock at $14 if it drops to that level.
At the time of this writing Tyler Craig had no positions on any of the aforementioned securities.
