ROKU Stock: Anticipating a Bullish Outcome
The S&P 500 has spent the majority of the year in correction territory. After peaking in late January, the S&P 500 has taken many months to regain its stature.
It has finally made a new high on the year, which is also a new all-time high. This event is a momentous occasion because it means that the bull market that began in 2009 is now the longest bull market in history.
As long as the current move toward higher index values isn’t derailed in the days ahead, I firmly believe that the markets are poised for further gains and that the longest bull market in history is still in development.
With this bullish theme in focus, I am highlighting Roku Inc (NASDAQ:ROKU) because it is currently testing a significant level of price resistance. This significant level of price resistance also happens to be its previous all-time high.
I believe that when ROKU stock finally breaks above this price point and forges a new-all time high, it will open the door to much higher prices.
The level of price resistance I am referring to is captured on the following Roku Inc stock chart.
Chart courtesy of StockCharts.com
This chart illustrates a significant level of price resistance that resides at $60.00. This level was first established on December 19, 2017.
This significant level of price resistance is all that currently stands in the way of higher stock prices. Once this level is breached, there won’t be anything left to contain the stock price from advancing. This will open the door to much higher prices.
The move that follows might mirror the break above the previous all-time high, which is now labeled a significant level of price support. Once Roku Inc stock broke above this level of price resistance, a significant move toward higher prices quickly followed. Roku shares nearly doubled before that move began to peter out, and a correction quickly followed.
This correction continued until the previous level of resistance was finally met from above. This type of price action is called a backtest. It reaffirms that a previous level of price resistance is now a new level of price support. Backtests also act like springboards, so it is not a mere coincidence that Roku found its footing at this level and staged an advance off of it.
If these moves do mirror each other, it suggests that once Roku stock breaks above the significant level of price resistance, it will become a new level of price support from which a move toward higher prices will manifest.
In order to assume that higher stock prices are on the horizon, resistance needs to be broken first. It just so happens that the price action captured on the following Roku price chart is suggesting that such an outcome is now setting up to occur.
Chart courtesy of StockCharts.com
The above Roku price chart focuses on the price action that occurred on August 9, when the shares gapped higher by 21.3% after the company reported better-than-expected second-quarter earnings that beat handsomely on both the top and bottom lines.
Price gaps are very significant events that provide very valuable information, which is why they are never to be dismissed.
This price gap has remained open, which is why I labeled it a continuation gap. Continuation gaps suggest that a stock has reached a midpoint, implying that the stock has further to run.
The price action that followed the continuation gap is reaffirming its implications because a midpoint consolidation pattern is now in development. Like the continuation gap, a midpoint consolidation pattern is suggesting that Roku Inc stock is setting up to make a move toward higher prices.
This midpoint consolidation pattern is developing right underneath the significant level of price resistance. It suggests that when the pattern is resolved in a bullish manner, the resistance level is likely to be challenged once again. Given the likelihood that the stock price breaks above it, higher prices are set to prevail.
Roku stock is approaching a level of price resistance, and its ability to break above that level will open the door to much higher prices.
The price action developing right beneath the resistance level is suggesting that the current level of price resistance is likely to fall in the very near future. That’s why I am anticipating a bullish outcome.