Roku Inc. (NASDAQ: ROKU) seems to be poised for a price surge as per its latest charts. Roku, Inc. manufactures a variety of digital media players for video streaming. Roku has an advertising business and also licenses its hardware and software to other companies.
Bullish Indications
#1 Downtrend Channel: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few months. This is marked in the daily chart in purple color. Currently, the stock is moving higher from the lower rail of the downtrend channel with high volume. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
ROKU – Daily Chart
#2 Bullish Stoch: The daily chart shows that the %K line (blue color) has currently crossed above the %D line (orange color). It is also moving higher from oversold levels. All these are possible bullish indications.
#3 Bullish RSI: The RSI is currently moving higher from oversold levels, indicating bullishness.
#4 Above Support Area: As you can see from the daily chart, the stock has currently moved up from a resistance-turned-support level. This level is marked as a purple dotted line. This looks like a good area for the stock to move higher.
ROKU – Weekly Chart
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, and is also moving higher from oversold levels, indicating possible bullishness.
#6 Oversold RSI: The RSI is currently near oversold levels and is slowly moving higher. This indicates that a bullish reversal may be imminent.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ROKU is if it trades above the breakout level of the downtrend channel. This translates to a price above $171.10. However, you can purchase half the intended quantity of shares of ROKU above $127.50.
TP: Our target prices are $142 and $154 (for entry near $127.50) and $190 and $203 (for entry near $171.10) in the next 4-6 months.
SL: To limit risk, place stop-loss at $120 (for entry near $127.50) and $160 (for entry near $171.10). Note that the stop-loss is on a closing basis.
Our target potential upside is 11% to 21% in the next 4 to 6 months.
- Entry near $127.50: For a risk of $7.50, our target rewards are $14.50 and $26.50. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $171.10: For a risk of $11.10, our target rewards are $18.90 and $31.90. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the downtrend channel with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
— Tara
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