Shares of GoPro Inc GPRO have plummeted (roughly 50 percent) since mid-August, as the beating of momentum stocks continues.
In a blog post published Friday morning, the Steady Trader’s head of investment strategy, Serge Berger, explained that GoPro and “a few other momentum darlings held up the broader market into mid-August.”
However, when those stocks began to decline, the whole market caved, and this led to a vast volatility spike.
Having said this, the expert assured the selling in GoPro’s stock increasingly seems to be overdone, “and a good-sized oversold bounce if not bottom-building could soon take place.”
The chart above goes back to the company’s IPO date in the summer of 2014. Following an initial robust rally into October 2014, the stock peaked and has since been experiencing a downtrend.
Berger noted, “In August, GoPro shares made an important lower high versus their 2014 highs, and the most recent selloff has since pushed the stock marginally below its March 2015 lows. From a momentum perspective, GPRO stock is well oversold, with the MACD oscillator on the weekly chart signaling so.”
The second chart is the daily for the stock. Following the 50 percent decline seen over the past month, the stock now stands substantially below its yellow. 21-day moving average and its blue, eight-day moving average.
Furthermore, the expert added, “The Relative Strength Index has reached all-time oversold readings and just represents the strongly trending sell-off since August.”
He continued to warn that “while active investors and traders may find it attractive to step into GPRO stock here, it is vital to approach this with appropriate risk management, as the stock is still very much in a downtrend. Considering that trying to catch the proverbial falling knife is not a high-probability strategy, what I would like to see take place first in GPRO stock is capitulation selling and a bullish reversal that clearly shows the bears having run out of growl.”
After the 10 percent drop seen Wednesday, which came on decent volume and fell below the horizontal support illustrated in the first chart, GoPro could finally be showing some “signs of capitulation.”
So, Berger concluded, “I am looking to buy the stock upon the next bullish reversal day and play it to the upside with a first price target around the $41 area.”
Shares of GoPro are down more than 7.4 percent on Friday trading.
Image Credit: Public Domain© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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