GoPro Inc (NASDAQ:GPRO) shares have been getting uppity this week. Blame it on bargain hunters. GPRO stock entered the new year a whisker from all-time lows. And nothing attracts the coupon clippers like the allure of an $8 stock offered at a steep discount.
The overall bullish mood seizing the Street obviously isn’t hurting either. Traders worried that 2017 would get off to as bad a start as last year are breathing a sigh of relief.
Here we are, three days with nary a whimper of doom. But four doesn’t seem likely.
Whether GoPro’s rousing start is worth getting excited about remains to be seen. Those hoping Thursday’s 3.7% surge is the beginning of some glorious resurrection will be disappointed at today’s action. As I type, GPRO stock is plumbing the depths pre-market, down some 4%. If it holds — and it may not — the retreat has all but given back yesterday’s gains. Watch closely to see if buyers step up to grab the down-gap.
If not, struggling GoPro stock is likely to continue … well, struggling.
On the technical front, this week’s stock pop didn’t change much. GoPro remains steeped in a downtrend across all but the smallest of time frames. One silver lining to yesterday’s jump is it carried shares above the 20-day moving average for the first time since October. So chalk that up to a small win for the bulls (emphasis on the small).
If GPRO lovers really want to get chart watchers excited about its recovery prospects, they need to press their advantage and start taking out some overhead resistance levels, pronto. Otherwise, this bounce will fade into the sunset like so many of its predecessors.
If GoPro stock can breach $9.60 and then the 50-day moving average at $10.13, its technical posture will improve dramatically. Until then, this pop remains highly speculative.
How to Trade GPRO Stock Here
If you can’t help but throw your lot in with the bulls here, do yourself a favor and wait for a bit more confirmation. If GoPro can take out the aforementioned resistance at $9.60, then give it a shot. I like selling naked puts at that point. If you can get at least 30 to 35 cents for selling the Feb $8 put, do so.
The potential reward will be limited to the initial credit of 30 cents and will be captured if GPRO stock sits above $8 at expiration. Bear in mind the initial margin requirement for selling the put should be around $160. So although the 30 cents per share reward ($30 total) may sound small, it will be a respectable 15% to 20% return on initial investment.
If you’re unwilling to acquire shares of GPRO if assigned, then buy back the put if the stock falls to $8.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.
