With market spectators overly-dejected, is now a good time to consider Roku (NASDAQ:ROKU) for your portfolio? Let’s plug in to what’s happening in Roku stock off and on the price chart to reach a more informed buy, sell, or hold-off decision for the portfolio.
An airline travel ban to continental Europe by the U.S. government and suspension of games in major leagues ranging from the NBA to global futbol leagues saw bears taking the field easily past the well-watch ‘bear market’ -20% decline threshold Thursday. And to say the least, the price action made for an interesting session on Wall Street.
More specifically, the worry-heavy headlines sent the S&P 500 and NASDAQ crashing 7% to 9.50%. The damage marked the worst single day sell-off since the 1987 stock market crash. What’s more, since February’s peak, the correction and sheer panic levels in the CBOE Volatility Index have rivaled the worst the financial crisis meltdown threw at investors. And over-the-top (OTT) streaming content upstart Roku hasn’t been immune.
Despite many pros promoting Roku’s business as a solid coronavirus play given the extra free time at home many people will be faced with, shares of ROKU have proven very sympathetic to the market’s bearish behavior. Roku is off 48% since its February high. By comparison, the tech-heavy NASDAQ 100 is off 29% after hitting an all-time-high within days of Roku stock’s earnings-driven high.
ROKU Stock Weekly Chart
Source: Charts by TradingView
The punishing price action might beg the question of whether it’s time to pull the plug or to tune in to what Roku stock is offering longer-term investors? If you are concerned a zombie apocalypse is upon us, you’re very late in the near-term for exiting or shorting shares. You’re better off preparing for zombies or the ‘end of days’ on a Roku channel like Netflix (NASDAQ:NFLX) or Amazon (NASDAQ:AMZN) right now. The thing is, technically ROKU is well-oversold.
A failure of the 62% retracement level tied to December 2018’s market-driven low and shares trading outside the weekly Bollinger Band are decent indications the price action in ROKU is overdone. And coupled with a pair of completed Fibonacci-based two-step patterns moving towards 127% and 162% extensions, as well as an oversold stochastics, I’d urge investors to avoid the temptation of exiting or shorting Roku stock right now. That doesn’t mean I’m a buyer of shares in today’s market. I’m not.
If you’re bullish on Roku I’d strongly suggest waiting on confirmation of a low in the market. It’s more important than any line drawn on an individual price chart by a wide margin. Shares of a volatile growth stock, not just an ugly coronavirus play, demand the broader averages support a buy decision given the treacherous current environment.
One sure way of having this type confirmation is a market-based follow-through day. I’ve written about this technical event extensively in recent weeks. And it bears repeating or more aptly re-linking. Bottom-line, successful FTD’s have historically saved investors from countless futile attempts at catching knives like Roku stock in markets that haven’t found a meaningful low. That being said, stay tuned for next week’s show!
Investment accounts under Christopher Tyler’s management do not currently own positions in 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