Shares of mountable and wearable camera maker GoPro Inc saw a sharp rally over the past couple of weeks as the company released a new set of products. As a result, the stock has also wiggled itself into a more favourable spot on the charts, which is to say that bearing any major outside negative news the path of least resistance for the time being looks to be higher.
On September 19 GoPro announced a new set of cameras and its much-awaited 'Karma' drone. The stock, which had been rallying in anticipation of this, appreciated further on the back of the announcement. Through a sentiment lens, the fact that the stock didn't fall apart – i.e. did not see a pop and drop or "sell the news" type of reaction at the margin – is a positive sign.
On the chart we see that GPRO stock has largely been on a one-way street lower (after the initial post-IPO honeymoon wore off) but that this rate of change lower began to stall out in early 2016.
The recent two week rally has now moved the stock back above horizontal resistance (blue line) as well as above its yellow 50-week simple moving average and thus resulted in a breakout of a multi-month technical base.
Source: Saxo Bank
On the daily chart we see that after an initial rally in August the stock pulled back to its red 200-day moving average into early September. From there the next rally took footing, which has since pushed the stock out of this multi-week consolidation phase and to levels last seen in January.
From here, while the stock may look increasingly overbought in the near-term and a pause may be needed, the path of least resistance through a multi-week/month lens does point higher.
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Source: Saxo Bank
Management and risk description
GoPro can be a volatile stock and it is thus best to trade this stock in reduced size and adhering to strict risk management rules. If one gets stopped out on this trade it may still be a buy upon the next notable daily bullish reversal as long as the bigger picture chart does not turn back down.
Entry: buy GPRO stock or the CFD at $16 or higher.
Time horizon: one to three months.
— Edited by Michael McKenna
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Non-independent investment research disclaimer applies. Read more