Here’s your trade on Roku (ROKU) (August 07, 2019)
ROKU
I want to look at Roku ( NASDAQ: ROKU ) today, shouldn’t be too long here. The stock made a big move on earnings; the company reported earnings, I think they lost less than people thought they would.
So here’s the deal with this company: They’re revenues are growing; their quarterly revenue growth year over year, meaning one quarter versus the same quarter the prior year has been growing in double digits. Four quarters ago it was 57 percent, then 39 percent, then 46 percent, then 51 percent, these are all big monster numbers. It’s what you want to see; now again, the company doesn’t make money, not yet, I don’t know if it ever will, don’t care, I don’t own the company.
The stock has been trading sideways for a while. The implied move on this was pretty big, where the upside move, we don’t care about the downside move now, could go up as high as $120.00 with something like that. And so here’s what I would say, as we look at the stock right now where it closed here and then it’s trading above 110.00, it is already up over 9 percent. My kind of rule of thumb is if a stock is up over 10 percent I am really, really looking at it as a potential short. Not necessarily, it could be a stock that I am looking to short and then after a couple of minutes I go, “Crap, I have got to buy this stock because it’s going a lot higher.” That could very well be the case here with Roku ( NASDAQ: ROKU ).
I would only buy this stock tomorrow, if #1, if I can stay at my screen and watch it all day. I can because that’s what I do, a lot of people can’t, so if you can’t then click off of this video and go on with your life. If you can watch your screen all day then, great, that’s the first prerequisite. The other one would be, it needs to break out above, I would say, 113.33; 113.44 was the high last month, I just want to see it get up to this general area. If it breaks out above 113.00 and it’s on volume then I would go ahead and buy this stock. It has to open first, I am not talking about if it gaps up and opens at 113.00, hurry up and buy the stock, it will be you and everybody else buying from pros who are happy to sell you all you want and then the stock will fall back down and then they will cover their shorts. That’s not what I am talking about.
What I am talking about is, if a stock ultimately runs up above this 113.00 and has some upside momentum you could say, “Well, I should have bought after hours at 110.00 and now Fitzpatrick is telling me to wait for 113.00.” Well, you can see after hours this is where the stock hit to, 113.00 so I have cost you $3.00 by suggesting that you wait. But in return I have given you a great deal of certainty that you wouldn’t have you bought now because the stock could not get above 113.00, it could gap and crap and fall back down.
What you want to do is plan your trade all the way through. Decide, I am only going to buy this stock if it moves up to a new high. And then I am going to be able to set my stop very, very tight because the only reason I would be buying a stock that goes to a new high is if I expect it to keep going. I DO NOT expect it to fall back much below, a percent or two fine, much below this last high. So if I am buying the stock right here I am not going to set my stop down here, come on, I am not going to do that. I will buy here because the stock broke out, right? And then I will probably set a stop a little bit below 112.00 or something like that. Because if the stock were to be up here and then fall back this low, well then we are clearly wrong about buying, right?
Again, buying a stock that gaps up 10 or 11 percent is nuts. You don’t want to be doing that. Every once and a while it works out but for the most part, those are the types of stock that you want to be looking to sell into. I can’t tell you what exactly to do on Roku ( NASDAQ: ROKU ) because I don’t know how it is going to trade tomorrow morning. I will be in our forum, for our members, looking at this kind of stuff. We had a really good day today but I am just kind of giving you the guidelines, buy it if it hits a new high, if it gaps up and then starts rolling over, short it with your stop above the last high.
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