Ride the GPRO bandwagon?POOR FUNDAMENTALS, BUT VALUATION COMPELLING?
It took a BUY rating from BAC, ahead of the much anticipated Karma drone product launch (conference due today) to propel the shares significantly higher, even though the company has been suffering from decreasing topline growth rates and an unprofitable business model. Will this trend continue?
TECHNICALLY STRONG
After the infernal descent of 2015, this year has mostly been one of consolidation for GPRO. Since the all-time low of mid May 2016, it has staged an impressive rebound (c. +80%) and it seems that the rounding bottom formation of 2016 is ending successfully, in a breakout to the upside supported by good volume and preceded by a golden cross. Today is the 3rd day of vertical upside on significant volume, suggesting some sustainability to this movement.
Those tempted by further potential upside could initiate a partial position here and buy further on weakness all the way to $14.00. If the breakout is further confirmed, the upside potential from here could be substantial but given the recent outperformance, the trade should take time to unfold. Allow wide stop losses to give this trade some time.
HOW TO TRADE THIS?
Key levels on the downside: $15.00/14.50/14.30/13.50
Key levels on the upside: 16.25/20.00
Aggressive investors should use a 13.50 stop-loss (-14%)
more cautious traders should use a 14.30 stop-loss
Alternatively, buy a 21/10 OTM Call with a 19/20 strike and pay some 2% for unlimited potential upside
