Did You Store Enough for Winter?

For every earnings beat and rally by a stock which had been a high-flying name into the report, there are also plenty of instances like ROKU, a stock which had performed valiantly since its last earnings report back in November 2017 and not given back much since. 

When names like ROKU rally into their report and then continue afterwards, many traders come out of the woodwork and espouse the necessity in holding through earnings. Of course, when we see ROKU down 19% this morning, there seems to be a conspicuous lack of those types of comments, with even a vast array of deleted tweets. 

In other words, as we often discuss with Members, earnings can often do trump technicals, up or down. Holding through earnings, especially when the market has displayed more general violent indecision and even some dislocations (e.g. XIV) than in recent memory, is a far greater risk which most traders do not account for. To be sure, you did not need to avoid all earnings at all costs. But adjusting your position sizing often makes sense, or at least taking a moment to devise a strategy and contingency plan for earnings often is a sound approach. 

Having said that, for those who stored enough acorns for winter and avoided ROKU earnings, as we had a Member do when he trades the name beforehand and floated it before the report, we are now in an interesting technical position.

Specifically, the ROKU daily chart, updated below, shows the high-flying streaming platform for distributing content is gapping back down to a major prior support level.

Why even consider ROKU now, after this earnings disaster? Well, for starters, consider that ROKU is still handily above its November 2017 earnings gap (around $19.50). With this in mind, ROKU may still be a new growth leader in its early stages, despite today's setback. 

Going forward, if ROKU can hold the $40 area now as support I would consider a support buy early next week. We also need the broad market to stay firm, of course. But if you avoided the ROKU earnings mess you have a clear head and may be in position to take advantage of what could prove to be another opportunity.