Is GoPro, Inc (NASDAQ:GPRO) an $18 Stock?

Gropro
Image by Gordon Tarpley

Has GoPro, Inc (NASDAQ:GPRO) finally found a bottom? Today’s chart says “definitely not.”

GoPro makes durable cameras you can attach to a helmet, a car, or a surfboard. Back in June 2014, GPRO stock became available for trading to the public. At the time, it was one of the most exciting companies in the country. Shares got very expensive, soaring from $35.00 at its initial public offering to over $98.00.

But as is typical when the public falls in love with a “story stock,” the big run is often followed by a big fall. In just the past few weeks, GoPro stock has dropped 60% on huge trading volume. This has been followed up by another seven percent drop in early trading Monday.

The question is: where is GoPro stock heading next? Let’s take a look at the chart.

Gropro Chart

Chart courtesy of www.StockCharts.com

The GoPro stock chart appears to be forming a flag pattern, one of the most reliable tools on the technical analyst’s workbench. The pattern resembles a rectangle marked by two parallel trend lines that tend to slope against the prevailing trend. It typically plays out in three parts.

  1. Flagpole: Flags require evidence of a sharp advance or decline on heavy volume. This move usually represents the first leg of a significant advance or decline and the flag is merely a pause. In the case of GPRO stock, shares began their steep decline late in August, falling from $50.00 to $32.00 per share.
  2. Flag: The flag is a small rectangle pattern that slopes against the previous trend. The price action just needs to be contained within two parallel trend lines.
  3. Break: The flag is completed when the stock breaks below the support line. We can see the downward trend resuming on GoPro shares today, with the stock plunging more than six percent on big volume.

Consolidations like a flag pattern are almost like a stock taking a breather. They are typically seen right after a big, quick move, allowing the stock to catch its breath before taking off again in the same direction.

How far could GPRO stock fall? Technicians believe flags often “fly at half-mast,” meaning they usually appear half way through a trend. In the case of GoPro, that would put a target price around $18.00 per share!

Read More: