Roku Inc. ROKU Inc. lets you to watch free and paid video content on your TV via the Internet. Roku closed 23% lower last Friday as traders reacted to a big bottom-line miss in the second quarter. Trading volume swelled to more than 46 million Roku shares Friday as investors voted with the feet and dumped shares.
Was this a selling climax that can start a bottoming process? Let's check Roku's charts and indicators.
In this daily bar chart of ROKU, below, we can see a long and painful decline in price over the past 12 months. Prices were testing the 50-day moving average line the past two months or so but gapped down to a new low on Friday. The daily On-Balance-Volume (OBV) line showed improvement from late April but turned lower on Friday as trading volume soared. The 12-day price momentum study shows higher lows from last August as the pace of the decline has been slowing. Normally a 12-month bullish divergence between price and momentum should have resulted in a recovery rally, but not in this case.
In this weekly Japanese candlestick chart of ROKU, below, we can see a long red real body (bearish) in the latest entry on the chart. Lower shadows in May did not generate a bounce. The 40-week moving average line is pointed lower. The weekly OBV line has been in decline for a long time. The 12-week price momentum study shows a bullish divergence from January but it has yet to generate a decent rebound.
In this daily Point and Figure chart of ROKU, below, we can see that prices reached a downside price target.
In this weekly Point and Figure chart of ROKU, below, we can see a still lower price target in the $40 area.
Bottom line strategy: 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.
