Is Roku Headed for a Breakdown?

: ROKU | Roku Inc. Cl A News, Ratings, and Charts

ROKU – Roku Inc. (ROKU) looks to be forming a bearish chart pattern known as a double top. If the stock falls through its support line, a breakdown is expected. Read more to learn how to take advantage of this trade.

Roku Inc. (ROKU) is the leading streaming platform in the U.S. by hours watched with over 40 billion hours of content streamed in 2019. The firm’s eponymous operating system is used not only in Roku’s own hardware but in co-branded TVs and soundbars from manufacturers like TCL, Onn, and Hisense.

The company has benefited from increased average revenue per user and user engagement due to social distancing. In addition, The Roku Channel is seeing a surge in premium subscription signups. Plus, growth in streaming hours should boost TV streaming advertising on its platform.

As of the most recent quarter, ROKU had $2.1 billion in cash compared to only $7 million in short term debt. Plus, the stock has a debt-to-equity ratio of 0.2. This has led to a Quality Grade of B in our POWR Ratings system.

Over the past three years, sales have grown an average of 52.4% per year. Analysts expect revenue to soar 85.4% year over year in the current quarter. However, the stock looks overvalued with a forward P/E of 200. ROKU has also shown bearish momentum since the end of July as shown in the chart below.

Take a look at the 2-year chart of ROKU below with added notations:

Chart of ROKU provided by TradingView

ROKU may be forming a bearish chart pattern known as a double top. Double tops are reversal patterns and are as simple as they sound: Rallying up to top #1, selling off to a support (green), and then rallying back up again to approximately the same top (#2).

Click Here to Read the Greatest Trading Book Ever Written

As with any price pattern, a confirmation of the double top pattern is needed. ROKU would confirm its pattern by breaking the $275 support that was created.  A short trade could be made on a break below the $275 level.

Want to Discover More Great Trades?

What is better than finding the 1 attractive stock in this article?

Discovering 5 timely trades…like the ones in this new special report. Click below to claim your free copy now!

5 Stocks Ready to BREAKOUT!


ROKU shares rose $1.84 (+0.62%) in premarket trading Tuesday. Year-to-date, ROKU has declined -9.87%, versus a 16.31% rise in the benchmark S&P 500 index during the same period.


About the Author: Christian Tharp


I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
ROKUGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Bull vs. Bear Contingency Plans

The S&P 500 (SPY) has endured its 2nd trip down towards bear market territory before a bounce ensued. This last downturn is thanks to the ugly earnings from both WalMart and Target. This is indeed a precarious time and we have to contemplate the odds of bull vs. bear market and the related contingency plans we would enact in our portfolios. 40 year investment veteran, Steve Reitmeister, shares that and more in the commentary below…

:  |  News, Ratings, and Charts

5 Stocks to Buy on the Next Market Pullback

Persisting factors like the multi-decade high inflation, deepening supply chain constraints, and the expectation of a recession due to the Federal Reserve’s aggressive policy tightening could lead to a further market pullback. So, it could be wise to bet on fundamentally sound stocks Nutrien (NTR), Centene (CNC), Itochu (ITOCY), Steel Dynamics (STLD), and Teck Resources (TECK) on every dip they witness in the near term. Let’s discuss.

:  |  News, Ratings, and Charts

Off Target?

There was reason for optimism earlier in the week as the S&P 500 (SPY) advanced nicely after skirting bear market territory. But then on Tuesday WalMart had shockingly poor earnings which was easily ignored. Unfortunately the next day Target reported even worse results and the investment world took notice with a 4% sell off. That rout extended through Friday as we briefly blew past the bear market dividing line at 3,855 to a low of 3,810. Then a late rally ensued ending the session back above bear territory at 3,901. Does WalMart and Target earnings truly change our outlook on the economy and what it means for the stock market? That is the key topic we need to explore this week in our POWR Value commentary. Read on below for more…

:  |  News, Ratings, and Charts

Daqo New Energy is Our Growth Stock of the Week

2022 has been very challenging for investors. Energy is one of the few themes that have worked. Investors should consider the alternative energy sector as many of these stocks are quite cheap and could see a surge in growth due to several catalysts. Read on to find out why Daqo New Energy (DQ) is our growth stock of the week.

:  |  News, Ratings, and Charts

Off Target?

There was reason for optimism earlier in the week as the S&P 500 (SPY) advanced nicely after skirting bear market territory. But then on Tuesday WalMart had shockingly poor earnings which was easily ignored. Unfortunately the next day Target reported even worse results and the investment world took notice with a 4% sell off. That rout extended through Friday as we briefly blew past the bear market dividing line at 3,855 to a low of 3,810. Then a late rally ensued ending the session back above bear territory at 3,901. Does WalMart and Target earnings truly change our outlook on the economy and what it means for the stock market? That is the key topic we need to explore this week in our POWR Value commentary. Read on below for more…

Read More Stories

More Roku Inc. Cl A (ROKU) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All ROKU News