From Ryan Schofield at Trade with Precision:
“Life is either a daring adventure or nothing at all.” Those words of wisdom from Helen Keller certainly have a nice ring to it and especially for those who love to enjoy thrilling outdoor activities. When GoPro released their small and powerful action cameras almost everybody was able to share the excitement of their everyday life with the whole world. I’m not quite sure, where we traders fit on the excitement scale, but GoPro’s chart is currently quite interesting.
In June 2014 GoPro sold 17.8 million shares at the top of the expected range of US$24 per share and has seen some volatile yet steady price action since then (as is visible in the weekly chart below).
Recently, price broke below the IPO price and is currently in a steady downtrend on the weekly and daily charts. Price is pulling back into equilibrium levels around the 10 and 20 period moving averages. This might provide us with a potential trend flow short opportunity, a strategy that has worked well on this chart in the past.
Having a closer look at the daily chart, several things are noticeable; besides price currently pulling back into the sell zone, we can see a Fibonacci cluster (61.8% retracement of the most recent move down and 38.2% of the move based on the previous swing point high) just below the IPO price. In my opinion the IPO price could qualify as a resistance level to add another level of protection for a potential short position.
The setup I’m waiting for to develop over the next few days is a further pullback into the cluster levels around the 23.5 level, a bearish candle with a high reward to risk set up in this region would define the setup to the short side. Until then, GoPro is on my watchlist.
Earnings have just been announced at the end of October, GoPro does not intend to pay a dividend according to their investor’s FAQ, so there shouldn’t be any company specific news or corporate actions interfering with a potential trade setup at the moment. It is worth paying attention to the pending sessions and announcements by both the FED and the ECB when planning your next moves in the market.
Not sure if this setup qualifies as a daring adventure, but that’s the kind of excitement I like.
Have a great trading week!