Roku Stock Price Trades into Saturation Point
Roku Inc Roku 5.28.19
Roku Inc has traded into my profit-taking pattern. I call this setup Saturation Plays.
During today's scan I searched for stocks showing relative strength. Stocks showing buying as the market traded lower. Roku stock price traded into new all-time highs, which peaked my interest until I looked at the last 4 days of trading.
It's ironic that the Street.com is calling the recent stock market decline a “value trap” because that's solid context for what a saturation play is. The setup is not a value play as much as a momentum trap.
It's s point in price action that looks too good to pass up. A situation where you are afraid of missing out, but you realize too late, they well, you were too late. You end up buying from those who bought stock earlier.
The key to the trade, and the “saturation” is a higher opening, AND a higher push off the open price. So imagine a stock opens at $20 (first print of the day) and then trades higher to $20.75 as the first move off the open price.
That price action is the ‘first push higher.” Looking at the setup in a vacuum however is where most traders get the pattern wrong. It's the price action of 4 consecutive “well-bid” candlesticks that is the saturation play setup. The push higher off the open COMPLETES the play.
If you're long, it's an opportunity to sell into new, late buyers.
What if it opens lower? The push off the open price is still the key. If you push lower, expect buying again and a test of the previous days high as the profit target. Combine the chart setup with the headline you see below and we have the perfect storm for late buyers getting caught on the wrong side of all-time highs,
Leave a comment if you have any questions.
Pete
Roku stock closes at record high for fourth consecutive session, market cap above $10 billion
Roku Inc. ROKU, +6.45% shares jumped another 6.2% Friday to close at $95.78, establishing a new record high for the fourth consecutive session.
Roku stock has been on a roll since the streaming-television company reported strong revenue growth on May 8, gaining 47.5% since that date.
marketwatch.com/roku-stock-closes-at-record-high
This Is a Stock Market Under Stress
This could either be a brilliant buying opportunity or a value trap. If a trade deal is not reached by the end of June, this selloff can get a lot worse.
May has been a much-needed eye-opener for many investors as they naively believed that the market had no downside. A positive trade outcome was priced in by the markets as it ground higher, despite valuations getting stretched.
There are various conspiracy theories about what happened, but only those present in the actual talks can and will know what caused Trump to lash out at the Chinese. He has shoved himself between a rock and a hard place.
