Trading Strategies For Roku Stock Before And After Q4 Earnings

Roku, Inc ROKU gapped up slightly to start Wednesday's session and was surging over 11% intraday. Roku is set to print its fourth-quarter financial results after the market closes.

When Roku printed its third-quarter earnings beat on Nov. 2, the stock gapped down over 12% the following day but ran into a group of buyers who caused the stock to close the session 4% lower.

For the third quarter, Roku reported revenue of $761.37 million, which beat the $702.32-million consensus estimate. The company reported negative earnings per share of 88 cents, beating a consensus estimate for a loss of $1.27.

For the fourth quarter, analysts, on average, estimate Roku will report a loss of $1.72 per share on revenues of $809.74 million.

Ahead of the event, Citigroup analyst Jason Bazinet maintained a Buy rating on Roku Tuesday and dropped the price target from $80 to $75.

From a technical analysis perspective, Roku’s stock looks bullish heading into the event, having settled into an uptrend pattern on the daily chart. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat. A company’s guidance for subsequent quarters, which is often provided during a conference call, can also heavily affect a stock’s direction.

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The Roku Chart: Roku’s gap up and surge higher on Wednesday had the stock looking to print a bullish kicker candlestick on the daily chart. The candlestick indicates Roku could trade higher again on Thursday.

• If that occurs, traders will want to see if Roku can slide up through the 200-day simple moving average (SMA). If Roku can regain that level as support, the stock will enter a possible longer-term bull cycle. If the stock rejects the 200-day SMA as resistance, bearish traders will want to watch for a possible downtrend to occur.
• Roku is trading in an uptrend, with the most recent higher low formed on Monday at $53.60 and the most recent higher high printed at the $66.86 mark on Feb. 2. For the uptrend to continue, Roku will need to form another higher high over the next few trading sessions.
• If Roku suffers a bearish reaction to its earnings print, bullish traders will want to see the stock form a lower low to negate the uptrend. If that happens, Roku may find support at the 50-day SMA.
• Roku has resistance above at $72.83 and $81.76 and support below at $61.50 and $55.88.

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