GPRO: Is GoPro Stock Bottoming?

With the Nasdaq Composite cresting 5,000, many a financial pundit are pulling out the pom-poms and donning the party hats. But not all technology stocks have joined in the bullish revelry. Some Nasdaq constituents missed the memo entirely.

One of the more prominent names among the ranks of the neglected is GoPro Inc (NASDAQ:GPRO). GPRO has been locked in a lonely game of limbo, dazzling onlookers and scaring shareholders with the consistency of its descent. GoPro stock tumbled another 4.9% just yesterday.

Since peaking north of $98 last October, GPRO has tumbled 59%. While it hasn’t yet returned to its IPO price of $28.65 it’s certainly getting close.

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Source: OptionsAnalytix

With prices now so low, the question circling the minds of spectators is whether GoPro stock is bottoming.

The short answer is no. As far as the longer version is concerned …

Perhaps the only argument for a bottom in GPRO is that it has already gone down a lot — and that’s perhaps the worst of all arguments a bottom fisher could cite. The problem, of course, is that oversold stocks can become even more oversold before rebounding.

The trend in GPRO is decisively down, and until we see some signs of a trend reversal, betting on a bottom is highly speculative.

Such signs include classic reversal patterns like a double bottom or inverse head-and-shoulders. Or, perhaps, simply wait for the stock to break above a prior resistance level or a key moving average like the 20-day or 50-day.

Bet With the Bears Via a GPRO Put Spread

If you think GPRO continues its descent for a while longer, consider the following bearish trade idea.

Buy the April $40/$35 put spread for $2 or better. The risk is limited to the initial debit paid and will be lost if GoPro stock is above $40 at expiration.

The max reward is limited to the distance between strikes minus the $2 debit, or $3, and will be captured if GPRO can fall below $35 by expiration.

GPRO is a bit oversold in the short run, so you may consider waiting for some type of bounce in the coming days before pulling the trigger on the put spread.

As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.

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