Bearish divergence. Be careful
Greetings All,
ROKU has experience tremendous price appreciation over the last couple of years. On the monthly charts, volume is decreasing while price is simultaneously moving higher. This is divergence - the bearish type. The shadows (candle wicks) of the previous two months indicate that bulls wanted to more upside, but the demand (i.e buyers) could not hold ROKU at that price point. The solid green trendline is a support, and ROKU may retrace to this trendline, which places the price point around $272, a 50% retracement from the ATH at $486.72. ROKU may even retrace to $221, which is near the bottom of the 2 year linear channel.
The bollinger bands illustrate that ROKU will eventually return to mean (blue line), which is slightly below the 61.8% retracement level.
The monthly swing chart indicate ROKU’s pivot is around the $250, slightly below the 50% retracement level. The decreasing volume is more pronounced in this chart.
In the weekly chart, there is a head & shoulders pattern (bearish) at R1, and resistance at R2 is pronounced. You can also see the volume at those price points are eclipsed at S1 and S2, which serve as retracement targets. Thus, the targets are $250, $221, and $150 if we see a 78% retracement.
On the daily chart, ROKU could return to the pivot at $419, or higher to close the gap at $437 and retest resistance at R1. Or, ROKU could complete the right shoulder of the H&S pattern, and fall to the $270 level, testing long-term trend support.
I’m bullish on the company overall, but we may experience technical corrections on price in the coming weeks and months. Thus, my outlook is bearish within the next quarter (3 months) as a general timeframe.
Happy Trading!
Disclaimer. My ideas are for informational purposes only. My ideas do not constitute solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments. You should not construe any such information or other comments as legal, tax, investment, financial, or other advice. There are risks associated with investing in securities. Investing in stocks, bonds, exchange traded funds, mutual funds, options and money market funds involve risk of loss. Loss of principal is possible. Please exercise your own due diligence.
ROKU has experience tremendous price appreciation over the last couple of years. On the monthly charts, volume is decreasing while price is simultaneously moving higher. This is divergence - the bearish type. The shadows (candle wicks) of the previous two months indicate that bulls wanted to more upside, but the demand (i.e buyers) could not hold ROKU at that price point. The solid green trendline is a support, and ROKU may retrace to this trendline, which places the price point around $272, a 50% retracement from the ATH at $486.72. ROKU may even retrace to $221, which is near the bottom of the 2 year linear channel.
The bollinger bands illustrate that ROKU will eventually return to mean (blue line), which is slightly below the 61.8% retracement level.
The monthly swing chart indicate ROKU’s pivot is around the $250, slightly below the 50% retracement level. The decreasing volume is more pronounced in this chart.
In the weekly chart, there is a head & shoulders pattern (bearish) at R1, and resistance at R2 is pronounced. You can also see the volume at those price points are eclipsed at S1 and S2, which serve as retracement targets. Thus, the targets are $250, $221, and $150 if we see a 78% retracement.
On the daily chart, ROKU could return to the pivot at $419, or higher to close the gap at $437 and retest resistance at R1. Or, ROKU could complete the right shoulder of the H&S pattern, and fall to the $270 level, testing long-term trend support.
I’m bullish on the company overall, but we may experience technical corrections on price in the coming weeks and months. Thus, my outlook is bearish within the next quarter (3 months) as a general timeframe.
Happy Trading!
Disclaimer. My ideas are for informational purposes only. My ideas do not constitute solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments. You should not construe any such information or other comments as legal, tax, investment, financial, or other advice. There are risks associated with investing in securities. Investing in stocks, bonds, exchange traded funds, mutual funds, options and money market funds involve risk of loss. Loss of principal is possible. Please exercise your own due diligence.
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