Roku (ROKU) shares sank sharply Wednesday evening after the streaming video company reported weak quarterly numbers and a downbeat forecast to shareholders. ROKU is trading about 20% lower in Thursday's premarket action.
In our August 1 review of ROKU we wrote that "Overall the charts and indicators of ROKU are mixed. The decline has been slowing for months but it has not produced a rebound. While Friday's selloff may have seen "throw in the towel" selling, we do not have a bottom reversal of any sort. Avoid the long side of ROKU." A weekly Point and Figure chart yielded a downside price target of $40.
Let's check out the charts and indicators again.
In the daily bar chart of ROKU, below, we can see the price action through Wednesday's close. Then shares have moved lower and lower the past year. The slopes of the 50-day and the 200-day moving averages are negative (bearish).
The trading volume has increased at a number of declines within the downtrend. The daily On-Balance-Volume (OBV) line rose from April to August suggesting more aggressive buying but that was the wrong message. The OBV line now shows a slight decline from mid-September.
The Moving Average Convergence Divergence (MACD) oscillator has been in bearish territory the past 12 months.
In the weekly Japanese candlestick chart of ROKU, below, we see a bearish setup. Prices are in a long-term decline. The slope of the 40-week moving average line is negative.
The weekly OBV line is bearish and so is the MACD oscillator. No signs of traders rejecting the lows.
In this daily Point and Figure chart of ROKU, below, we used close-only price data and the chart, which is not updated with the premarket action, shows an upside price target.
In this weekly close-only Point and Figure chart of ROKU, below, we can see a potential downside price target in the $39-$38 area.
Bottom-line strategy: Continue to avoid the long side of ROKU. With a price target in the $38 area and no signs of aggressive buying we are likely to see further losses in the days and weeks ahead.
