Little Reason For Optimism In GoPro's Chart

The news for GoPro Inc GPRO shareholders went from bad to worse following the company’s Q4 earnings, and the stock is trading down more than 17 percent in early Thursday trading to new all-time lows.

While there are plenty of reasons to argue that the stock is a buy from a fundamental perspective, including the now single-digit P/E ratio, GoPro has an incredible amount of negative technical momentum in its chart.

No Precedent

The first piece of bad news from a technical perspective is that these lows are uncharted territory for the stock. GoPro has never traded this low before in its brief public history, so there are no levels to look to for support.

Secondly, While GoPro bounced after a previous 62 percent pullback from $98 to $37, the magnitude of the current pullback is even larger. There was no bounce at 62 percent this time, as GoPro has dropped more than 81 percent support-free from the $65 level it hit in August.

Reason For Hope?

There are two possible sources of short-term support, but neither are particularly comforting for GoPro bulls. First, there is a downward-sloping support line dating back to October 2014 that has yet to be broken, but it has an extremely negative slope. That support line currently sits around $10, but six months from now it will be well into the single-digits.

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Secondly, the RSI of 22.2 indicates that the stock is extremely oversold, typically a good sign that the downward momentum could soon take a breather at least. However, GoPro has spent plenty of time with an RSI below 25 over the past six months, and it has done very little to stop or pause the stock’s precipitous decline.

Takeaway

From a technical standpoint, GoPro’s stock is completely broken, and those looking for bullish indicators at this point are mostly grasping at straws. The stock may bottom in coming weeks, but there is certainly very little in the chart in terms of technical support at the moment.

Disclosure: the author holds no position in the stocks mentioned.