A stock on Jim Cramer's "Magnificent Seven" list is Roku (ROKU) , a go-to name for streaming entertainment. With movie theaters still in limbo, investors continue to buy stocks like ROKU and Netflix (NFLX) regardless of their earnings, according to Cramer.
When we looked at ROKU on Oct. 2 we wrote that, "The price of ROKU has more than tripled from its March nadir and with a developing bearish divergence from our momentum indicator I feel a more cautious stance is needed into year-end. Raise sell stops to a close below $170 now on remaining longs."
Let's check out the latest charts of ROKU to see if anything has changed.
In the daily bar chart of ROKU, below, we can see that prices have churned around in the $225-$240 area so far this month. The slope of the 50-day moving average line and the 200-day moving average line remain positive.
Trading volume has weakened from late September into October. The On-Balance-Volume (OBV) line has turned lower.
The Moving Average Convergence Divergence (MACD) oscillator has almost crossed to the downside for a take profits sell signal.
In the weekly Japanese candlestick chart of ROKU, below, we can see a bearish red candle with a large upper shadow. This pattern shows that traders rejected the highs and that prices closed lower than the opening that week -- two strikes.
The weekly OBV line has been flat for months now while the slow stochastic indicator (an overbought/oversold indicator) has crossed to the downside from overbought territory above 80.
In this daily Point and Figure chart of ROKU, below, we can see that the shares met and exceeded an upside price target of $215.
The volume by price data (left scale) tells us that there is little support below the market. This can make prices vulnerable when traders want to get out of longs.
Bottom-line strategy: ROKU is up about eight-fold from its late 2018 low around $30 (check the weekly chart above). With these kinds of outsized gains early buyers can become motivated sellers. Raise protection to a close below $195.