GPRO Stock: A Bottom is Forged
Many who have owned “GoPro” cameras are enamoured with the products, but very few can say the same thing about GoPro Inc (NASDAQ:GPRO) stock.
Unless you’re a recent shareholder, the hype that has followed the product has not transferred over to returns for you. My intentions are not to rub salt in any wounds; on the contrary, I have reason to believe that a bottom has formed and that higher prices are forthcoming.
My reasoning doesn’t come from randomness like a gut feeling or a coin flip. When I analyze stocks, I use a systematic strategy that relies on technical signals. When multiple signals are confirming one trading bias, this bias determines my outlook and trading strategy.
The following chart contains multiple signals that executed simultaneously.
Chart Courtesy of www.stockCharts.com
GoPro stock has overcome two important levels of resistance and executed two signals. Shares closed above the 200-day moving average, plus a double bottom trend reversal has just been confirmed.
The first signal, closing above the 200-day moving average, is a significant signal because investors use the moving average as a dividing line between stocks that are in a bull market vs. stocks in a bear market. When shares are trading above this moving average, it is seen as bullish; when shares are trading below the moving average, it is seen as bearish. Thus, GPRO closing above the 200-day moving average is bullish news. This event marks the first time since August 2015 that the price was able to trade above the aforementioned moving average.
The second signal, a double bottom reversal, is a pattern that appears at the bottom 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.
The horizontal resistance level marked by the peak in between the two bottoms also coincided with the 200-day moving average. The break above this price level signalled a key reversal on two fronts. Traders refer to this as a double buy signal. Two distinct camps switched their bias from bearish to bullish at the same time. Events similar to this have led to above-average gains, as shorts attempt to cover positions at the same time.
The double bottom pattern also benefits traders, as it generates a possible price objective. This reversal pattern projects a potential price target of $19.25 and represents a return of 22% from the current trading price.
The following chart illustrates two different resistance levels as possible price targets.
Chart Courtesy of www.stockCharts.com
This chart illustrates key levels of resistance.
One long-term price objective is derived from the downtrend line. This line has defined the bear market that has punished shares. The downtrend line, highlighted in blue, is created connecting the peaks. A downtrend is defined by lower lows and confirmed by lower highs. It can easily be identified as the price moves from the upper left to the lower right. The line currently stands just above $25.00.
The second long-term price objective is the horizontal resistance. This area acted as support initially after GPRO stock went public. On the third attempt, the share price broke this level. As always in technical analysis, when a level of support is broken, it then becomes an area of resistance. The line currently stands at $37.00.
Both price objectives obtained from overhead resistance are substantially higher than the current price. I can only conclude from my findings that the current path of least resistance is higher. Can shares really hit these two price objectives? It is always a possibility, but only time will tell what the reality will be.
Bottom Line on GPRO Stock
GPRO stock has given me the required signals to confirm a bullish bias. Numerous price objectives have presented themselves. I will be on the watch for these price targets and will be looking at bullish setups to confirm them. If shares close below the 200-day moving average and/or the peak that defined the double bottom, I will have some concerns with regards to my bias.