GoPro might become the next big uptrend
a few days ago I looked at GoPro, Inc. (GPRO) — the company that builds small, portable action cameras. I own one of their cameras myself. It’s high-quality stuff and ideal for diving, hiking or anything else that needs to be filmed in outdoor conditions.
In case you don’t know how it looks, here’s an example of their camera products:
Based on my own experience, it’s a great product.
But there is an issue…
From mid-2015 onward, their income has been dropping. Check out their annual finance data.
2016 was a solid negative net income.
And the stock prices reacted accordingly and went on a major dive. From their previous highs of $65, prices fell down to around $5 over 2 years.
And why did this happen?
There are two reasons:
- Competition has caught up with them. They were the market leader, but now there are similar products available
- Product failure. They tried to diversify into the drone market (not a bad idea), but their product had flaws and needed a costly work-over.
There are signs of a change
In the image above, you have (literally) a green light on the horizon. The stock price has turned into an uptrend.
Finances are not where they were before — but they appear to improve slightly in their quarterly statement. While still in the negative, a turning point might have been reached.
Cut to the chase. Is it a buy?
Yes — just limit your risk. The upwards potential is great, the price could go back into the $30’s range within a year. And the trend is just starting.
And not only are the historical prices in an uptrend, but there has also been a reversal indicator: a cross-over between the long-term and short-term trend lines.
What about the industry trend?
It’s pretty solid. GoPro falls under the technology sector, which has been doing well. Below are the technology sector trends:
81% of all technology stocks are trending upward in pricing. GoPro might be joining them.
Buy, limit and risk
Remember the One-Percent rule. Don’t expose more than 1% of your capital to the risk of a losing trade. Here are the numbers for an example portfolio worth $100,000 (but plug in your own!):
- Risk = 1% of 100k$ = $1,000
- Limit Buy Price: I suggest close to the last closing price, here $11.51
- Trailing Stop: at the start of a trend, volatile price swings are common. So my stop price is at least 15% away from the current price better more. Here I suggest $2 as stop price distance. If you buy at $11.51, your initial stop price will be $9.51.
- # of shares = (risk) / (stop price distance) = $1,000 / $2 = 500 shares
- Cash required = 500 x $11.51 = $5,755 (estimated)
Remember that these values are only valid for a portfolio of 100k$.
So if you think that’s a good trade for you, go ahead and create your orders.