GPRO stock: Critical Support
I have written about GoPro Inc (NASDAQ:GPRO) stock on numerous occasions because the chart has become constructive.
I use charts as my window to the world. Some people might dismiss my style of investment valuation, and that is perfectly fine. I have had my share of naysayers, and if I listened to any of them, I would not be using the only style I find timely and ideal. Technical analysis is by no means perfect—signals and patterns fail all the time—but failed patterns are signals too.
GPRO stock has come a long way since shares peak at $98.47 in October 2014. A bear market effectively ravaged the the share price. As is the case with most trends, they will persist for as long as time allows. Prices have tendencies to reach extremes, in which price trends tend to overshoot most rational levels of valuation.
Perhaps the level that GoPro stock reached in 2016, at a low of $9.00, was an overshoot. If the pattern in the charts continues to play out in a bullish manner, then perhaps that is exactly what happened to GoPro stock. Only time, and perhaps a few chart patterns, will tell.
The following chart illustrates the pattern that first piqued my interest in GoPro stock.
Chart courtesy of StockCharts.com
The double bottom and then the golden cross is what first got me excited about the bullish prospects of GoPro stock.
In August 2016, GPRO stock confirmed that a double bottom was in play. A double bottom is a reversal pattern that signals an end of a trend. It is marked by two consecutive bottoms, separated by one peak in between. This pattern was complete when GoPro stock closed above the peak (highlighted in pink) that separated the two bottoms.
This pattern is constructive because, not only does it signal a reversal of trend, it also produces a potential price objective. The pattern above projects a potential price target of $19.00.
In April 2016, GPRO stock generated a golden cross, which 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). This signal reaffirmed the bullish theme and is instrumental in creating a necessary tailwind to push the share price higher.
Traders use the golden cross signal to confirm that a bull market is on the horizon. It is not uncommon for the trend to accelerate soon after such a signal is created. As a result, I found it always wise to trade in the direction of this momentum indicator.
The following GPRO stock chart illustrates a trend line where attention must be paid.
Chart courtesy of StockCharts.com
The uptrend line that developed is created by connecting the valleys of the price chart. An uptrend is defined by the price action as the trend moves higher. Higher peaks are confirmed by higher valleys. This trend can easily be identified as the price moves from the lower left to the upper right.
If there is one characteristic I look for in an investment, it is this type of trend. I have said numerous times that the most important tool contained in my tool box is the the trend line, and it is by far the simplest.
This line defines the bull market in GPRO stock and this line must hold for the bulls to remain in control. A break below this line would damage the charts considerably, and any bullish bias I had would effectively be negated.
The Bottom Line on GoPro stock
I am currently bullish on GoPro stock, but my bias is going to be tested as the price is once again approaching the uptrend line. If that trend line breaks, so too does my bullish bias on GPRO stock. In order for any constructive bullish argument to persist, it is imperative that this trend line hold.