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Is It Time To Buy GoPro Shares?

01/05/15 05:06:34 PM
by Koos van der Merwe

Is it wise to buy a share as it lists on the market?

Security:   GPRO
Position:   Buy

My answer would be, "Not in my books." Most shares hit the market at a high, then correct as those shareholders who are not restricted to selling their shares take profits to better their living standards. It is therefore always wiser to sit back, watch what the share is doing, and how it is trading before taking the plunge. There are exceptions however if you have the courage and exceptional knowledge of the company. There are those who wait for the initial correction, then buy. GoPro (GPRO) was one of those exceptions. Today, however, it is also one of the most heavily shorted stocks in the market.

Figure 1. Daily Chart. Here you see the Elliott wave count, Fibonacci retracements, and JM Internal Band for GoPro (GPRO).
Graphic provided by: AdvancedGET.
The chart in Figure 1 is a daily chart showing how the share was listed on the market at $28.86 on June 26, 2014. Over the following four days, the share price rose to $49.90 (by July 1, 2014) and then fell over the next two weeks to $36.10 by July 14, 2014. From there it rose to $48.40 by July 31, 2014 and then once again fell to $37.24 by August 8, 2014. From the low of August 8, 2014 the share price rose strongly to a high of $98.47 by October 7, 2014 in a five wave Elliot count. From that level, the share price dropped in an ABC correction to a low of $53.77 by December 19, 2014. It then rose to its present level of $66.05 suggesting a JM internal band buy by moving above the upper JM internal band. The JM internal band is a 15- period simple moving average offset by 2% positive and 2% negative. A break above the upper band suggests a buy, and below the lower band, a sell.

Do note the relative strength index (RSI) which gave a buy on December 22, 2014. Note also that the correction is a 61.8% retracement of the rise from $28.86 to $98.47.

Figure 2. Buy Signal Triggered. Here you see that the buy signal has been triggered on the vote line based on JM Strategy, Red Green Strategy Long 6, TDIJak indicator, and the RSI(14).
Graphic provided by: Omnitrader..
Looking at the Omnitrader chart in Figure 2, you can see that a buy signal has been triggered on the Vote line, based on the strategies, JM Strategy and Red Green Strategy Long 6 shown in green below the Vote line. Note also that the TDIJak indicator and the RSI(14) have also given buy signals.

GoPro is one of the most heavily shorted stocks in the market. You can argue that any rise is a short squeeze. With the stock market now expected to rise into 2015, buying the share could well be a win.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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