Thinking of trading Roku (ROKU)? Here’s how I’m doing it. (September 11, 2018)


Let’s talk Roku ( NASDAQ: ROKU ). If you remember, a week or two ago, Roku ( NASDAQ: ROKU ) took a hit and it wasn’t a big hit, that was kind of the deal. In fact, I think it was this day; it doesn’t really matter. The stock was doing well, it had come out of this really solid multi-month pattern; you can see how long it lasted, for almost 8 months here and then it started to tick up in a nice cup and handle. A new high, all systems go, and then Amazon ( NASDAQ: AMZN ) announces that they are entering this field and so they are going to be competitors of Roku ( NASDAQ: ROKU ) and the stock takes a tumble down here. That was it, that was it. Since that time the stock has been coming up here.

You can look at this and say, “Wow, that is extended, it’s too late to buy.” I didn’t think so because the stock did come back. It was right to take profits if you had been long for a while because Amazon ( NASDAQ: AMZN ) came in and you don’t want to sit here and say, “No, my money is on Roku.” Screw that, my money isn’t, my money is on Lex Luthor anytime. That bald guy is going to rule the world, he is in the process of it right now.”

So you are staying long this stock now because Amazon ( NASDAQ: AMZN ) comes out after it and the stock rebounds? Okay, that’s like Lazarus, this thing just won’t die. The stock is up here and then finally you get this nice breakout, right? You get a solid breakout, that was Monday, and then today it moves even higher.

I took some profits today. I kind of wished I hadn’t taken any but my discipline is that if I have got a position that is up, say 15 percent, sometimes less but we’ll say 12-15 percent, I want to take some off the table, I don’t like to sell it all but I will take some off the table just to drop my cost basis in the rest of it. You can see the stock ran up first thing in the morning and then started to trade down. I took some profits right around here, but then the stock has stabilized and now it is back up. So the bottom line for me is, I’m looking at the top line, I think it is above $71.00. I think this stock continues to move; what you do depends on your time frame.

Here is what I am talking about: Look at the weekly chart, this stock has actually not been trading for that long and it is just NOW cranking on a new IPO move; where the stock had ultimately peaked here. First, it was here and then once the stock got back above that it ran over 100 percent before it peaked. Then it took quite a while for the stock to pull back and then only got above it here. So now I am actually looking for this stock to continue to move higher. You can trade around the position, certainly, but I would want to be long this stock unless it falls back below $65.00. And the way the stock is trading I really don’t think it is going to do that.

So if you are long Roku ( NASDAQ: ROKU ) stay long. I honestly can’t recommend buying the stock after it is up 4 consecutive days. Especially when you consider it even more; like how many days has this been trading? It has been trading 9 days and only 2 of those days have seen down days. So the stock is up quite a bit; it is a total undisciplined buy if you are buying right now.

But if you are holding it I wouldn’t sell. I wish I had back the shares that I sold by the way this thing is trading. And I may build my position back up tomorrow, just letting you know. Sometimes when a stock is running you just have to say, “You know what? I want to get a little bit bigger in the name.” But typically, this is really the last time, on a discipline basis, that you should be buying the stock. Down here, maybe up here, but once it moves to a new high you’re really not a buyer, you’re a potential seller. That’s Fitzpatrick’s 10th rule of trading, know when to break the prior 9.

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