What goes up must come down. Those same timeless words and laws of gravity are now also offering growth investors an opportunity to buy Roku Inc (NASDAQ:ROKU) at compelling levels on and off the price chart. But to prevent any unwanted “dot-bomb” fiascos, tune into the technical picture in Roku stock.
It has been an October to remember. Just when it seemed like Wall Street was a lithium-filled balloon floating along to never-ending new highs, the balloon burst. And along with it, high-octane growth stories like ROKU stock tanked in punishing fashion as the risky side of momentum investing rears its ugly head.
By the numbers, Wall Street is obviously spooked. The Street has been rattled by interest rates, the trade war, Italian debt and Saudi-based political theater, all of which have lopped 10% off the S&P 500. At the same time, the tech-heavy Nasdaq Composite is off about 9%, and SPDR S&P MidCap 400 ETF (NYSEARCA:MDY) is down 9.4%.
But what about Roku stock? Please stay tuned.
Both the Nasdaq and MidCap indices characterize Roku, the market’s largest over-the-top (OTT) streaming TV provider with its $5.4 billion market capitalization. Yet, as one the market’s growth darlings in 2018, the inhospitable trading environment has resulted in Roku stock racking up a much more stunning, but typical, loss of 36%.
The very same correction has taken ROKU from a high-water mark gain of 44% to flat on the year. So, what’s next? Nobody except maybe Goldman knows for certain. Still, as October panics have historically led to great times to buy shares and considering that Roku has been a solid pattern trader for bulls, there’s reason to watch Roku stock for nearby buying opportunities.
The weekly chart in Roku stock can attest it’s been a difficult October for bulls with four straight weeks of red candles sporting a pattern of lower lows and lower highs. As mentioned though, ROKU has also been a solid pattern trader for bulls.
From a beautiful Fibonacci-based Gartley carved out in late winter to this summer’s bountiful cup-with-handle breakout—Roku has done quite well by many technically-oriented investors since its initial public offering in 2017.
Following its textbook correction, Roku stock is trading inside a solid, albeit wide bullish zone backed by prior pattern highs, Fibonacci supports and channel support. And considering its history, there are reasons to think ROKU can reassert its bullish trend in the weeks ahead.
For traders interested in owning Roku stock as a longer-term hold based on the price chart and a compelling secular growth story; my recommendation is to wait. Right now and with sentiment the way it is, having the patience to wait on a weekly candlestick reversal pattern such as a hammer or doji decision candlestick to be confirmed with some bullish follow-through makes sense.
Today’s strategy may not cherry-pick an absolute bottom in ROKU, but it should help position traders with a stronger purchase near and longer-term. And at the end of the day, week, month and year that’s all that really matters.
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.
