close icon

ROKU Is the Very Definition of a Bubble Stock

Roku Inc. is a TV streaming platform operator with over 27 million active accounts as of the end of 2018. The company held it IPO in September 2017 and is approaching its second birthday as a public company.

Unfortunately, Roku has been a money-losing company for years. Yet, it has a market cap of over $12.3 billion. ROKU stock reached an all-time high of $113.44 a share earlier this week. Yesterday, it closed slightly above $109. But instead of simply extrapolating the past trend into the future, investors should be very careful, especially when a loss-making company trades at such a rich valuation.

Obviously, Roku’s fundamentals and its stock price parted ways long time ago. In order to find out if the stock is finally approaching a point of reversal we will have to use a different approach. The Elliott Wave chart below should make the currently complacent bulls feel quite nervous.

Roku stock on the verge of a bearish Elliott Wave reversal

Roku ‘s 4-hour chart reveals the stock’s entire surge from $26.30 in December 2018. Typically, a 314% price rally in seven months should be enough to ring the bubble alarm in your head. On top of that, it has shaped up to be a perfect five-wave impulse, labeled 1-2-3-4-5.

According to the Wave principle, a three-wave correction in the opposite direction follows every impulse. This means ROKU stock can soon be expected to head south for a notable retracement. The support area near $70 a share looks like reasonable bearish target.

In addition to the wave structure, the RSI indicator reveals a bearish divergence between wave 3 and 5. Roku has been a wonder stock in 2019 so far, but if this analysis is correct it is also a bubble stock that is about to pop. Careless bulls may end up with a ~35% loss from current levels.

Did you like this analysis? Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!

Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

MongoDB – Bearish Pattern Joins Nosebleed Valuation

MongoDB Inc. is a general purpose database platform developer and provider. The company was founded in 2007, but only came public ten years later – in 2017. During the following four years, the stock has risen from an IPO price of $33 to $515 a share as of last week. So, it is fair to…

Read More »

Pandora Does Things Right. Stock May Need a Breather

When we wrote our previous article on Danish jewelry maker Pandora in December, 2020, the stock was up over three-fold since March. That recovery from DKK 180 to DKK 651 didn’t not come out of the blue, though. It was the result of a bullish setup we managed to identify as early as July 2019.…

Read More »

Match ‘s SP500 Inclusion a Good Excuse to Reach $200

Match Group Inc. rose over 10% in post-market trading Friday following reports that it is going to be included in the S&P 500. The company, which owns Tinder, OkCupid and most other major dating apps in the U.S., has a market cap of over $41B. Despite the anticipated “summer of love”, though, this is not…

Read More »

Cameco Stock Seems to Have Finally Turned a Corner

Uranium spot prices are on the verge of breaking above $34/lb, up over 80% from the bottom of $18/lb reached in late-2016. Cameco, as one of the world’s top uranium producers, is now seeing its stock price rising in tandem. Yesterday, it closed at $19.16 after reaching $21.95 in June. We first covered Cameco in…

Read More »

A Fresh Look At Cigna ‘s Elliott Wave Super Cycle

In a case study article on Cigna, published in October, 2016, we examined how a fundamentally sound and undervalued stock can still drop nearly 90%. The reason for that crash didn’t lie in some company specific issue. Rather it happened to occur during the biggest financial crisis in 80 years. Nevertheless, we made the point…

Read More »

CBOE Takeover Rumor Lifts Stock to Elliott Wave Target

We first wrote about CBOE Global Markets less than eight months ago. The S&P 500 had already recouped all its COVID selloff losses and was hovering at new all-time highs. CBOE, in contrast, was still down 30% from its 2018 record, trading below $97 a share. For some reason, the market was ignoring the company’s…

Read More »

Ahead of Ulta Beauty ‘s 150% Gain Since Lockdown

Buying shares in a beauty retailer in March 2020 sounded like a crazy, stupid idea. Stock markets around the world were plunging at a record pace amid a global GDP crash resulting from government-enforced lockdowns. People were stockpiling necessities in preparations not to leave their homes in the foreseeable future. With COVID-19 cases rising everywhere,…

Read More »

More analyses