Robinhood Stock Breaks Bullishly Into Overhead Gap: What's Next?

Robinhood Markets Inc HOOD gapped down 8.54% after printing its third-quarter results, which missed analyst estimates and included weak guidance. Following the results, analysts from KeyBanc and Rosenblatt lowered their price targets for Robinhood’s stock to $50.

A $50 price target is about 35% higher than where the stock is currently trading, and on Wednesday bulls came in and bought the oversold stock, which caused Robinhood to soar up over 6% intraday and close the session 5.86% higher. 

On Nov. 1, Restaurant Brands International Inc QSR-owned fast food chain Burger King, in partnership with Robinhood, began offering its loyalty club members a chance to win Bitcoin BTC/USD, Ethereum ETH/USD and Dogecoin DOGE/USD. Every customer wishing to use their code must have or download the Robinhood app to see if they’ve won, which will surely bring an increase in the brokerage's active monthly users.

The Robinhood Chart: On Monday, Robinhood climbed up into the upper gap on high daily volume. High volume indicates there is a high level of trader and investor interest in a stock, and in Robinhood’s case the volume was bullish.

Technical traders may have seen at least a bounce in the cards because the stock’s relative strength index (RSI) was registering in at about 30% since Oct. 27. When a stock’s RSI nears or falls below the 30% level, it becomes oversold, which can be a buy signal.

Robinhood is trading in a fairly consistent downtrend under a descending trendline that has been holding the stock down since Aug. 10. The trendline has acted as resistance each time Robinhood has tried to break up bullish from it. If the stock is able to break up above the trendline on high volume, it may indicate the downtrend is over and an uptrend is about to begin.

Robinhood is trading slightly above the eight-day exponential moving average (EMA) but below the 21-day, with the eight-day EMA trending below the 21-day, which indicates indecision. The stock is trading below the 50-day simple moving average, which indicates longer-term sentiment is bearish.

• Bulls want to see sustained big bullish volume drive Robinhood’s stock up through the descending trendline and above the last higher low at $40.25 to indicate the stock may start trading in an uptrend. Robinhood has resistance above at $39.23 and $42.44.
• Bears want to see big bearish volume enter Robinhood’s stock to drop it back down toward the $33.99 level and toward its last lower resistance at the all-time low of $33.25. Below the level, there is no further support in the form of price history.Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.