This is a DAILY chart of GPRO - Moving Averages Only
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| Click the chart for a larger chart of GPRO |
- Let me start this post by reminding everyone that GPRO is still a "new issue". We don't have much history to rely on. But we are going to run with what we have. Remember you can always look at an hourly chart too if that makes you feel better.
GPRO has been on a tear for the last 4 days. Although I missed the initial trigger for this latest move, lets look at a couple things that are pointing at a potentially positive longer term story.
The first things I want to focus on are pullback levels. The first time GPRO corrected, it came all the way back to about $36. The second time it corrected, it came back to about $38. Pullbacks are constructive in a stock. Pullbacks to higher levels is an indication that big time traders & investors see value at a higher price than they used to. So does this mean GPRO will pull back to an even higher level the next time it pulls back? Maybe :)
The second thing I want to focus on is the moving averages. I like to pay close attention to the 8, 21, & 50 day ema's. The 8 should be above the 21 and the 21 should be above the 50. You can see the 8 was above the 21 until there were a couple days of decline in the stock price. Now the 8 is trying to get above the 21 again with the recent positive price action. If the 8 does go above the 21, you could say GPRO is beginning to act like other uptrending stocks. You might feel like GPRO has run too far too fast. And you may be right. But if the 8 day ema gets above & stays above the 21 day ema then GPRO is a good long going forward.
I want to be a TECHNICIAN when I grow up...
This is a DAILY chart of GPRO - Trend Lines Included
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| Click the chart for a larger chart of GPRO |
** I just noticed a "UT 2" note on the bottom left corner of the chart. Please ignore it **
- If you are not a "Linear Trader" or "Linear Investor" as I am you may feel overwhelmed by what you see on the above chart. But give me a few minutes and I will explain it to you.
Let's start with the gray horizontal lines. You may have to look at the hourly chart to see where some of these came from but they are all levels I deemed important early on. For instance, if you look at the candle representing the first day of trading you will notice I have a horizontal line at the top and bottom of the candle. I believe the first day's trading range is important so I marked the top & bottom with horizontal lines. All the horizontal lines have significance to me. They are not arbitrary and most were created in the first week of GPRO's life.
The horizontal lines are potential support & resistance levels. If you read my previous post (the link is at the top of this post) you will see that I talked about these levels and how they might help us in the future. It turns out that $38ish was a very important level recently. Before that was the $36 level. I didn't see the $36 level and therefor don't have a horizontal line for it. $38ish is the best horizontal support we have at this point. Why? Because GPRO came back to $38ish twice and has turned higher both times. I would say $45ish is the best resistance we have so far. Why? Look at how many times GPRO has touched the $45ish line and then immediately turned lower. Big time traders & investors are not convinced that GPRO is worth $45. So when it gets there they sell it. At some point this will change.
What about the shaded box? What is that? I said in my previous post that GPRO has lived in the $41 to $45 range for most of it's life. I am still willing to say that. So if you want a pretty high probability trade you can buy shares at $41 (or $38 if it gets that low) and sell them at $45. that's a 10% move that took about 10 days last time it happened. We are on that same road again only it started at $38. If you are long now you have to look for a change in direction around $45. More precisely, hold your long position as long as the closing price stays above UT 2. Once the price breaks the UT 2 trend line you have to prepare for lower prices. If I was going to take a guess I would guess that this might happen around the top of the shaded box.
- Let's talk about UT 1, DT 1 & UT 2... For me, these lines are guides. They help me decide what may be coming. But they are only guides. They are not "tomorrow's newspaper today".
UT 1 is an uptrend line that starts at the low of day one and touches the most recent lows from last week. I use this line as my ultimate stop or line in the sand. If I am long GPRO I will sell all remaining shares if the price closes below this line. I say all remaining because I always look for ways to limit my losses & keep most of my gains. In other words, I should have sold some or most of my shares before the price dropped to UT 1.
DT 1 is a downtrend line that starts at the highest high and then touches the next lowest high. I use this line in two ways. I see it as potential resistance, a place where the stock may turn lower. But I also see it as an area of momentum once the price closes above that line. If everyone thinks GPRO will turn lower at DT 1 and it actually goes right on through to even higher prices, some big investors & traders are going to jump in for the next leg higher. That jumping in will increase the price even more. And that's a good thing if you are long.
UT 2 is an uptrend line that gives me clues about the shorter term. If I was lucky enough, or good enough, to get in between $38 and $41 I don't want to let the market take away my profits. So I use UT 2 as a sign that the stock may rest. When GPRO closes below UT 2 I would sell some of my stock. Then I will wait to see if GPRO bounces off UT 1 or maybe closes below it. Then I would buy or sell accordingly.
Trade What You See...Not What You Think, Or Feel, Or Hope, Or ...
The Trend Is Your Friend...Until It's Not
Limit Risk & Protect Your Profits
