Breaking Down The Roblox Rally In A Market Looking For Good News

The highly valued growth technology sector needed a catalyst to jumpstart it, and it got one live during Monday’s PreMarket Prep show. That catalyst came from Roblox Corp RBLX, which is the PreMarket Prep Stock of the Day.

Roblox Holding Up Well: It is hard to say an issue is holding up well when it made an all-time high last November at $141.60 and closed on Friday at $35.56. It's true, though — least from a relative strength standpoint since May, when many other issues in the sector bottomed as well.

Whereas the S&P 500 index breached its June low in September, Roblox did not even come close to its May low last month. Roblox made its all-time low in May at $21.65 and just undercut its September low ($33.57) when it traded down to $33.20 last week.

The Catalyst: Before the opening, Roblox reported upbeat September 2022 key metrics. Daily active users were 57.8 million, up 23% year-over-year, and estimated bookings were between $212 million and $219 million, up 11% to 15% year-over-year.

The company forecast that it has weathered the storm with respect to the strength of the dollar versus other currencies and it will have less of an impact on revenue in the fourth quarter. 

PreMarket Prep's Take On Roblox: PreMarket Prep co-host Dennis Dick was the first to comment on the issue, which was already green for the session at $37 and bolted to $40.

“Just before our guest came on, the company came out with some great metrics for September,” Dick said. “These stocks have been so beaten up since last year, any kind of good news is going to ignite a short squeeze or relief pop.”

The author of this article noted minor resistance at $40, but if the stock could clear that area, there were no other daily highs until $42. Also, listeners were alerted to potential sympathy plays off the news, such as Unity Software Inc. U.

RBLX Price Action: The issue has far exceeded that expectation. After a much higher opening ($41.20 vs. $35.56), it has a brief decline to $40.51 and resumed its move higher. As of 2 p.m. EST, it had reached $43.66 and was trading at $42.58 at last check. 

The high coincides with its September 15 close ($43.50) and is the highest level since it peaked on Sept. 15 at $47.05.

The discussion on the issue from Monday’s show can be found here:

Photo via Shutterstock.