FIT Stock: Coinciding Levels of Resistance
Fitbit Inc (NYSE:FIT) stock made some buzz last week on the news that it started a partnership agreement with DexCom, Inc. (NASDAQ:DXCM) that would give diabetes patients the ability to track their glucose levels using a Fitbit device. This news sent FIT stock surging by 9.8% on September 7, and in the process, the stock price tested a very influential and important level of price resistance. This level of price resistance is what I believe separates Fitbit stock from a true bull market.
This is a bold statement to make regarding this investment, and I will explain why the level that currently sits at $6.80 is both influential and important.
Before I delve into the significance of this price point, I need to explain for those who have not frequented my reports, that I generate my views on an investment by analyzing the company’s stock chart. This method of investment analysis is called technical analysis and it is based on the notion that historical data points can be used to speculate on what the future may bring. I have been studying and applying this method for nearly 20 years and it has provided great value to my investment strategies.
The following Fitbit stock chart illustrates why $6.80 is currently a very important and influential price point.
Chart courtesy of StockCharts.com
This FIT stock chart illustrates a bearish trend that began soon after inception and it contains the quintessential characteristic that defines all bearish trends, which is a series of lower lows and lower highs.
What makes this bearish trend special is that a simple downtrend line can be used to capture it. This downtrend line is created by connecting the peaks on the stock chart.
This simple trend line, which defines the bearish trend, also acts as a significant level of price resistance that has prevented this investment from advancing. Every time an attempt was made to breach this downtrend line, investors were quick to thwart these attempts by inundating the trading action with selling pressure.
This downtrend line currently sits at $6.80, and it is why this price point is so significant. If a bull market is ever going to develop, the first step would involve breaking above this downtrend line, and unfortunately, that has yet to occur. The good news is that the surge in price has created a positive development which could act as a precursor.
Focusing on the $6.80 price point, the downtrend line is not the only metric that is suggesting that this level is significant.
The following Fitbit stock chart illustrates another metric that is suggesting that the $6.80 price point is important. The same stock chart is also illustrating that the surge in price caused the stock price to break above a key metric, which could be suggesting that a bottom is forming.
Chart courtesy of StockCharts.com
This FIT stock chart illustrates that the $6.80 price point is also a horizontal level of price resistance that was created when the stock price gapped lower in January of this year. Like the downtrend line, this horizontal level of price resistance has thwarted all attempts at moving beyond it.
Both Fitbit stock charts illustrate that a move above $6.80 would break two coinciding levels of resistance that have contained the stock price from advancing. This feat would be suggesting that the stock price has bottomed, but that would be getting ahead of ourselves. The good news is that there have at least been some positive developments.
The positive developments I am speaking of are that the surge in Fitbit stock caused the stock prices to gap up above the 200-day moving average.
The 200-day moving average is a popular tool used to distinguish between an investment is healthy and bullish, and an investment that is unhealthy and bearish. Accomplishing this task is quite easy because if the stock price is trading above the 200-day moving average, the investment is deemed healthy and bullish. If the stock price is trading below it suggests that the investment is unhealthy and bearish.
Breaking above the 200-day moving average is a bullish feat for FIT stock, and gapping above it reinforces that notion. The fact still remains that in order for Fitbit stock to gain any traction, the stock price needs to break above the $6.80 price point.
News of a partnership agreement with DexCom, Inc. caused Fitbit stock to surge. The surge in price met resistance and a very influential level of price resistance. In order to even suggest that a bull market is in development, FIT stock needs to overcome it. Until such a feat is accomplished, I will continue to sit on the sideline with a neutral rating.