Active-Trader - Fib in GPRO

Welcome back Active-Traders.

Very few companies who have gone public in 2014 have had the spectacular performance of GoPro symbol GPRO.  The shares debuted at $28.65 back on 6/26/2014.  Today, a mere 90-plus days later, the stock closed the day at $82.10 which is an amazing 86% gain from the IPO price.

When and where will the move end?  Read on for my explanation of how fib analysis can answer these very relevant questions.

Recall that Fb levels are simply multiples of the magnitude of Elliot Wave 1 which is basically the move from a bottom to some top which resulted in the first meaningful pullback. Finding the bottom and the top of Elliot Wave 1 is the first and most important thing you need to know to calculate fiv levels.  Let's look at GPRO.

The chart on the left shows my first take at the Wave 1 move for GPRO. Note how the price found a bottom, rallied up, then fell back to the breakout point and found some support once again. This is typical of Wave 1 moves where the bottom is the lowest low on the chart and is not violated to to the downside.

Once you know those numbers, you can project the 3 most important lines beyond wave 1 which are the 161.8%, 261.8% and 423.6% and the associated price levels.  We know the levels are correct when we observe how price reacts to those levels as it rises. Doing so we find that the 161% level at $66.70 was quickly violated to the upside then became an important level of support moving forward.

Since then the stock has been straight up and we find ourselves just a point or 2 below the top of the sequence, the line which represents 423.6% of Elliot Wave 1 move.  So there's our first price target - $83.46 which I expect we will reach not far into the trading day this coming Monday.  But is that it - the top of the top?   Let's look for another interpretation.

Instead of Wave 1 ending at 47.97 on 7/31/2014, lets assume it ends at 56.86 on 9/3/2014.  In this case, note how the 161% line also acted as an area of resistance instead of support as in the prior interpretation.  This adds some extra credence to this second interpretation and based on that we find the 261% line overhead at the $89.42 price level and the 423.6% line up at just under $122 price level.

All that said, I expect higher prices in GPRO with the first target at $83.46 and the second target at $89.42 which I expect we will see by the end of next week.  I went out long the 80-84 Call Debit Spread and some shares.

Have a great week ahead.