Roku Stock Flashing Bull Signal Amid Record Highs

Roku options are affordably priced at the moment

Assistant Editor
Dec 17, 2020 at 2:33 PM
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Streaming giant Roku Inc (NASDAQ:ROKU) scored a record high of $352.12 out of the gate today, enjoying tailwinds after announcing the addition of HBO Max to its streaming platform. This prompted two price-target hikes from Benchmark and Stephens, to $4150 and $250 respectively. With the pandemic still raging on, it's no surprise that streaming platforms are among the chief stay-at-home stocks at the front of investors' minds. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, ROKU is worth keeping an eye on after flashing a historically reliable bullish signal.

ROKU's new peak comes amid historically low implied volatility (IV) -- a combination that has been bullish for the stock in the past. According to White's modeling, there have been two other instances in the past five years when the stock was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) sat in the 20th annual percentile or lower -- as is the case with ROKU's current SVI of 58.9%, which sits in the 10th percentile of its 12-month range.

The data shows that one month after that signal, the streaming giant was up 15%. From its current perch at $333.50, another move of similar magnitude would put the stock at another all-time high, around $383.53. ROKU is trading at more than five times the previously mentioned pre-pandemic lows, with the November consolidating bouncing off its 60-day moving average.ROKU Chart December 17

In the options pits, calls rule the roost amid limited absolute volume. Data from the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), shows that Roku stock's 10-day call/put volume ratio of 2.92 ranks in the 81st percentile of its annual range. This mean calls are being picked up at a much faster-than-usual clip.

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