Investors, Tune Into Roku Inc Today!

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Roku stock - Investors, Tune Into Roku Inc Today!

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Some are still saying and betting on a bleak picture for Roku Inc (NASDAQ:ROKU) to continue. However, if you’re the type of investor who closely watches those all-important levels for your buy decisions, the big picture for Roku stock looks ready for a bullish story to emerge. Let me explain.

Wall Street has been anything but kind to Roku stock and its investors. Shares have tumbled roughly 38% since delivering an earnings confessional in late February. Within a mixed report, investors opted to tune into slightly weaker-than-forecast guidance instead of strong above-views top- and bottom-line growth, Roku’s first full-year positive operating cash flow and broadening revenue split between hardware and platform sales.

That’s not the worst of it either for ROKU stock. Since forging an all-time-high of $58.80 in mid-December, the alternative streaming media platform has been pummeled even harder with the recent and once-buoyant IPO turning tail and into an “investors pulling out” situation.

And there’s many investors that still believe there’s more pain ahead for ROKU.

Stay tuned? It’s fair to say Roku stock could always turn into an even bigger horror show. It would also be unwise to completely tune those bears out. But if traders are agreeable to the big picture I’m watching unfold on the Roku stock chart; technically speaking, conditions are looking up for ROKU bulls.

Roku Stock Daily Price Chart    

Source: Charts by TradingView

Technically, Roku stock appears to have carved out a significant low on the daily chart. Support in this case is backed by a Fibonacci-based Gartley reversal pattern. The Gartley is comprised of two wing patterns adhering to key price levels using Fibonacci retracement levels.

In the provided daily chart, I’ve labeled ROKU’s Gartley. Beginning at a key low in front of earnings back in November denoted by “X” the first wing finished forming at point “B” on a successful test of the 50% retracement level.

Roku stock’s second wing appears to have finished forming Thursday. The initial development occurred at “C” as a high at the 62% retracement level was quickly confirmed despite Roku’s earnings beat. Now it appears point “D” is in place. A bullish hammer low found support at the 62% Fibonacci level and the 100% 2-step or mirror pattern level wherein leg AB matches leg CD.

With retracement levels tested, a bullish candlestick to complete the pattern and some oversold divergence in stochastics acting as secondary confirmation; Roku stock could be ready for a new bullish script to begin.

Roku Stock Bull Call Spread Strategy

One favored spread combination is a slightly out-of-the-money bull call spread. Verticals are excellent strategies for directionally-motivated traders with the benefits of reducing and limiting dollar and Greek risks. Further, with a technical low in place I’d prefer to see hold, there’s no reason to increase downside exposure using a vertical strategy such as a put credit spread.  

Reviewing Roku’s options, the June $40/$45 bull call spread looks attractive. With shares at $33.51 the vertical is priced for 80 cents or less than 2.5% of the risk associated with holding ROKU shares.

If Roku stock rallies and finishes above $45 at expiration, the vertical can realize its max profit of $4.20 as the spread expands to $5 intrinsically for a return of 525%.

Seeing that type of upside in Roku stock may seem like a stretch today. But given a three-month holding period with an embedded earnings catalyst, shares off 45% from the Gartley pattern and all-time-highs and the inherent flexibility and safety of owning a call vertical, I’m agreeable with this sort of contrarian positioning.

Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2018/03/roku-inc-roku-tune-into-roku-stock-today/.

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