ROKU finds buyers at key support level
Roku Inc. (ROKU) Technical Analysis Report for Feb 14, 2020 | by Techniquant Editorial Team
ROKU ended the week 4.83% higher at 130.25 after tanking $8.80 (-6.33%) today on high volume, strongly underperforming the S&P 500 (0.18%) following Thursday's earnings report. The bears were in full control today, moving the market lower throughout the whole session. Closing below Thursday's low at 138.36, the stock confirmed its breakout through the previous session low after trading up to $10.96 below it intraday.
Daily Candlestick Chart (ROKU as at Feb 14, 2020):
ROKU reported earnings of $-0.13 per share after Thursday's market close. With analysts having expected an EPS of $-0.14, Roku Inc. beat market expectations by 7.1%. The company's last earnings report was released on Nov. 6, 2019, when Roku Inc. reported earnings of $-0.22 per share topping market expectations by 21.4%.
Friday's trading range has been $23.80 (15.95%), that's far above the last trading month's daily average range of $6.60. Weekly volatility is also higher, being way above the market's average weekly trading range. The longer-term, monthly volatility is currently higher than usual for ROKU.
In a volatile session, prices traded above the prior day's high as well as below the previous day's low, forming a bearish Outside Bar. In spite of a strong opening the share closed below the prior day's open and close, forming a bearish Engulfing Candle. Additionally, one bearish candlestick pattern matches today's price action, the Black Candle. The last time a Black Candle showed up on February 7th, ROKU actually gained 6.41% on the following trading day.
After trading down to 127.40 earlier during the day, the market bounced off the key technical support level at 128.38 (S1). The failure to close below the support could increase that levels importance as support going forward. Roku closed back below the 100-day moving average at 134.06.
ROKU shows strength in the short-term supported by its long-term uptrend with only the medium-term trend being bearish.
Selling might accelerate should prices move below the nearby swing low at 123.90 where further sell stops could get activated. With prices trading close to this year's low at 120.35, downside momentum might speed up should the stock break out to new lows for the year. As prices are trading close to February's low at 123.20, downside momentum could accelerate should the share mark new lows for the month.
Among the 18 market conditions that our pattern recognition engine identified today, the statistics for the Price Action based market condition "Strong Down Move" stand out. While it is usually interpreted as bearish, it has actually shown to be bullish for Roku. Out of 32 times, ROKU closed higher 71.88% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after 10 trading days, showing a win rate of 65.63% with an average market move of 5.32%.