GPRO Stock: Bottoms Up
GoPro Inc (NASDAQ:GPRO) has developed a cult following of adrenaline junkies who want to record and upload their own dangerous antics for the world to see. I too would love to do such a thing, but recording my journey to work, driving through dangerous, congested traffic hardly qualifies for what most viewers are looking for. My daredevil aspirations aside, GoPro stock has piqued my interest on an investment basis.
It is not the product, nor the financials, nor even the prestige of owning a GoPro camera that has piqued my interest. It is the GPRO stock chart that has all of my undivided attention. There is nothing more compelling to me as an investor than a bottoming pattern. A confirmed trend reversal offers a tremendous opportunity. This is potentially the point in time—if I look back in a few years—that will mark the exact point GoPro stock made a turn for the better. This bottoming pattern will only be obvious and apparent after the fact.
The following chart is what originally drew me to GoPro stock.
Chart courtesy of StockCharts.com
GPRO stock has spent most of 2016 putting in a double bottom pattern. A double bottom is a reversal pattern that appears at the end of a trend. It is marked by two consecutive bottoms, separated by a peak in between. The pattern is confirmed when shares close above the peak that separates the two bottoms.
Double bottom patterns are of great benefit because, not only do they signal a change in the trend, they produce a possible price objective. This reversal pattern projects a potential price target of $19.00
GoPro stock has finally confirmed this bottom, but not before shares whipped on both sides of the level that confirmed it. A new development that reaffirmed this process developed in September when GPRO stock generated a golden cross.
A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). Traders use this signal to confirm that a bull market is on the horizon, and this signal was instrumental in confirming a trend reversal.
The target price generated from the double bottom is only one potential price target. The following GoPro stock chart illustrates other potential price targets.
Chart courtesy of StockCharts.com
There are two distinct levels of resistance on the chart above.
The first level is the downtrend line highlighted in navy blue, and this represents the overall bearish picture in GPRO stock. This line is created by connecting the peaks on the chart, and an end to the bear market would require that this line be broken to the upside.
The second level of resistance is highlighted by the light blue line and represents a horizontal level of resistance that once upon a time acted as a level of support. When levels of support break, they become new levels of resistance.
Based on both of these trend lines, resistance is currently sitting in the range between $35.00-$40.00, and it would be a wonderful feat if GPRO stock is set to test that level in the future. I am optimistic about a possible test because there was no backtesting of this level when the shares first broke down through it. It is not uncommon for shares to trade back and test a previous level of support when it is broken.
The Bottom Line on GoPro Stock
I am bullish on GPRO stock, and my bias is based on the positive developments in the GoPro stock price chart. My bias will remain bullish for as long as the charts support this view. Speculation about potential targets is inconsequential at the moment, and those targets will be dealt with when they are reached.