GPRO Stock: Setting up to Surge
GoPro has become a noun in the vocabulary of adventure seekers, or just about anybody wanting to strap a camera to their body and record their antics. GoPro Inc (NASDAQ:GPRO) has grown a huge following as the company has been able to build a network around its products. GoPro’s resulting success has developed into a cult following. The hype surrounding the company’s products was a driving force that pushed GoPro stocks to a high just shy of $100.00 shortly after shares went public.
I was always a skeptic of GoPro, as I couldn’t justify their lofty valuations when shares were trading near that $100.00 mark. My concerns were not unfounded, as GPRO stock plummeted, and hit a low of just under $9.00 in May 2016.
Just as share prices can overshoot on the upside, so too can shares overshoot on the downside. Overshoots in price can produce opportunities where investors can enter positions at considerable value. There have been positive developments in GPRO stock, as the following chart illustrates.
Chart courtesy of StockCharts.com
There are numerous positive developments in the chart above that have recently piqued my interest. The pattern is alluding to a bottom and the converging of the moving averages.
The pattern that I have outlined on the GoPro stock chart is a potential double bottom. A double bottom is a reversal pattern that appears at the end of trend. It is marked by two consecutive bottoms, separated by one peak in between. The pattern is confirmed when shares close above the peak that separates the two bottoms.
I love these patterns because they provide a much-needed price objective that can be used to formulate a trading strategy. This reversal pattern projects a potential GoPro stock price target of $19.25.
The bottoming pattern is in the process of being reaffirmed. Two moving averages are converging and are implying that a golden cross is in the making. A golden cross will add a bullish tailwind to an already bullish reversal pattern.
A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. Traders use this signal to confirm that a bull market is on the horizon. It is wise to trade in the direction of this signal.
The following chart illustrates the bullish trading action on a one-hour GoPro stock chart.
Chart courtesy of StockCharts.com
The line in blue highlighted in the GPRO stock price chart is an uptrend line. This line defines the bull market that began after shares bottomed at just under $9.00 in May. This trend line is significant because as long as GoPro stock remains above this trend line, the position is deemed bullish. Traders can use this line to acquire shares as the price is being tested, or set a stop-loss just below it.
The support on the uptrend line coincides with the 200-day moving average (see first chart). So at this juncture, that price point will offer great support if GPRO stock were to fall below the horizontal moving average, which is the first area of support. A break below the uptrend line would be of great concern and would also negate the reversal pattern.
The Bottom Line on GPRO stock
GPRO stock is just beginning to stage an advance as the trend reversal is currently being tested. If the pattern is indeed a reversal pattern, then there is a significant upside potential that traders can capture. As long as the trend line holds, my view on GoPro stock is bullish.
If gadgets are a theme that is consistent and appropriate with your investment objectives, I suggest you check out the following report that my astute colleague has just released: “This Device Will Be Bigger that the ‘iPhone’.” Click HERE to access the report.