BAD NEWS OUT OF THE WAY?
The stock was demolished after disappointing and the drone debacle. This lead many analysts to downgrade it (current consensus rating = HOLD) with an estimated average target price at the current money. There currently seems to be a lot of bad news in stock. Short levels have also sky-rocketed recently.
CROOKED OUT OF THE WAY
During this debacle, GPRO completed a somewhat crooked formation and the stock retraced back 55% of the distance from the top of the head to the neckline. It currently looks like it stabilizing in a flat consolidation channel / new trading range.
WHERE TO NOW?
Expecting the stock to take the same time to rebound as it did to complete the - 3 months. Expecting limited downside from here, although more disappointments or a rough market could take it below the historical low, towards the 8.00 level.
THREE TRADING STRATEGIES
1. Outright Long
Buy here and hold for a breakout above 11.35. Stop loss at 9.75, as trading at/below that level would invalidate the rebound.
2. Synthetic long only
Pay $0.43/share for a call option expiring on Jan 20'17 to purchase the shares at $12.
3. Costless options strategy
Buy the Jan 20'17 $12 call at $0.43/share and pair it with same maturity $8 put at the same price. $8/share is a good place to go long if the stock continues to slide because: a) it represents a 90% completion of the H$S formation target, b) it is 7% below the historical low, and c) that level would probably spark take-over discussions to pull the stock back up...
Since I initiated this post, the costless options strategy has become a credit strategy: Buy the jan'17 $12 call at $0.31/share and sell the jan'17 $8 put at $0.59/share. You make $0.28/share while you await the breakout, or for the chance of going long some 18% lower.