Roku: Bullish Confirmation Analysis 4H (Jun. 17)

X Force Global Analysis:


Roku is an American company offering a line of digital media players that offer access to streaming media content. In this analysis, we take a look at the technicals and fundamentals of this stock, assessing potentiality for a bullish rally.

Fundamental Analysis

- Roku stock has declined by almost 40% from its highs due to the impact of the recession and negative short-term news flow, but the big picture remains intact, and Roku is still a market leader in programmatic advertising with enormous room for growth in the long term.
- User growth and engagement remain stronger than ever.
- Despite the lowered advertising expenditures, Roku will still be able to deliver substantial revenue growth this year
- Profit margins will be affected by weak advertising demand during the recession, but the business model allows for attractive profitability at the fundamental level
- Thus, makes sense to expect Roku to deliver expanding margin in the years ahead if management executes well.

Technical Analysis

- The first thing we spot is a reverse head and shoulders pattern on the 4H chart
- The right shoulder has completed its formation, and prices have broken through the descending trend line resistance, as well ask the neckline
- Prices demonstrate strong bullish momentum with bullish engulfing candles
- Prices have also broken through and closed above the Ichimoku cloud resistance, indicating a bullish trend reversal
- The Exponential Moving Average (EMA) Ribbon is also looking to form a bullish cross
- The Relative Strength Index (RSI) creates higher lows and higher highs, showing an uptrend
- The Moving Average Convergence Divergence (MACD) shows increasing bullish histograms as well.

What We Believe

While we believe that Roku is valued at the right price, not only does it have solid fundamentals for long term growth, technicals demonstrate immediate term bullish potential.

Trade Safe.