Roblox Stock Breaks Up From Bull Flag Pattern: How To Play The Possible Continuation Move

Roblox Corporation RBLX was relatively flat in the premarket on Thursday after rallying 6.57% on Wednesday, breaking up from a bull flag pattern on the daily chart.

On May 11, the day following the company’s better-than-expected revenue report, a number of analysts raised their price targets on Roblox. Read more here...

The spike higher following the news paired with three subsequent days of consolidation settled Roblox into a bull flag pattern. A bull flag pattern is created with a sharp rise higher forming the pole, which is then followed by a consolidation pattern that brings the stock lower between a channel with parallel lines or into a tightening triangle pattern.

For bearish traders, the "trend is your friend" (until it's not) and the stock may continue downward within the following channel for a short period of time. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.

Bullish traders will want to watch for a break up from the upper descending trendline of the flag formation, on high volume, for an entry. When a stock breaks up from a bull flag pattern, the measured move higher is equal to the length of the pole and should be added to the lowest price within the flag.

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The Roblox Chart: Roblox broke up from the bull flag pattern on higher-than-average volume, which indicates the pattern was recognized. The measured move of the flag is 23%, which suggests Roblox could eventually trade up toward $46.

• Wednesday’s surge higher also caused Roblox to confirm its uptrend remains intact. The most recent higher low was formed on Monday at $37.95 and the most recent confirmed higher high was printed at the $41.62 mark on May 11.
• On Wednesday, Roblox printed a bullish kicker, which suggests higher prices may come on Thursday. If that occurs, Roblox may find resistance at the top of a gap that exists between $41.99 and $44.94.
• The second most likely scenario is that Roblox will begin to consolidate lower, possibly printing an inside bar pattern. If Roblox forms an inside bar, it will lean bullish for continuation higher over the next few days.
• Bearish traders want to see Roblox print a bearish reversal candlestick, such as a doji or hammer candlestick, which could signal that at least a retracement to print a higher low is on the horizon.
• Roblox has resistance above at $43.10 and $48.13 and support below at $39.10 and $36.04.

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