The 40-day moving average has been bullish for the stock in the past
The shares of Roku Inc (NASDAQ:ROKU) are down 1.3% to trade at $416.00 at last check, ahead of its second-quarter earnings report, due out after the close tomorrow, August 4.
The equity is expected to post profits of 13 cents per share, and has a split post-earnings history -- closing half of its next-day sessions higher during the past two years. The security has averaged a post-earnings swing of 10.7%, regardless of direction. This time around, the options market is pricing in a slightly bigger move of 12.4%.
On the charts, ROKU has pulled back from its July 27 record high of $490.76. However, this fall has the stock within one standard deviation of its 40-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, 10 similar signals have occurred in the past three years. Roku stock enjoyed a positive return one month later in 67% of those cases, averaging a 12.6% gain. From its current perch, a comparable move would send the stock back toward its recent highs.
Yesterday, Morgan Stanley threw in a price-target hike to $325 from $300. However, the firm kept an "underweight" rating on the shares. Analysts are mostly optimistic, though. Of the 20 in coverage, 17 consider the stock a "buy" or better.
Meanwhile, now looks like a good time to weigh in on Roku's next move with options. The security's Schaeffer's Volatility Scorecard (SVS) sits at a high 95 out of 100, meaning ROKU has exceeded option traders' volatility expectations during the past year.