On Thursday, we flagged ROKU’s vulnerability based on our -1/+2 sell set up.
The 3 Day Chart was pointing down (-1) and then, last Thursday, ROKU traced out two consecutive higher daily highs (+2).
Bearishly, the current decline in ROKU follows a test of the September ATH.
That all-time high was a large range Key Reversal Day and Gilligan sell signal…
Much like IWM installed on Friday, December 27.
ROKU’s November test of the all time high carved out a 1 2 3 Swing to a Test pattern, leaving another Gilligan sell signal… as well as a Soup Nazi sell signal on when it recaptured and then jackknifed back below the previous little swing high.
Underscoring the bearish position of ROKU was the Breakaway Gap on December 2.
This week, ROKU triggered a Rule of 4 Sell signal — a break of a 3 point trendline.
Notice how this trendline is ‘proved’ by the upper rail of a trend channel that catches the Oct/Nov highs.
Conclusion. Not all signals/setups are created equal. Since defining many of my buy and sell strategies in my Hit & Run books, I have found that the context of the pattern in which they occur underpins the power of these strategies.
Additionally, the natural geometry of the Principle of Squares is a critical factor determining the trend.
For example, 360 degrees or one SQUARE in price down from the 177 ATH is 127. This was the low December 16.
177 is the blue arrow
127 is the red arrow
98 is the purple arrow
360 degrees is a natural place for support and resistance to play out.
Notice when ROKU snapped 127 on September 20, it waterfalled to 98 days later.
Notice that 98 squares both 177 and 127.
Notice that 177 and 127 align with/vibrate off the day of the high, September 9.
By definition then, 98 was ‘square’ September 9.
Where is ROKU headed now?
Here’s a projection that may be on the table.
With ROKU breaking below its rising trend channel with authority yesterday, it suggests a drop to 79 and the bottom of a declining trend channel.
79 is 180 degrees straight across and opposite the September 27 98 low.
Interestingly, 79 ties to the October 2018 peak, which saw a drop to 26.
26 ties to a loss of two full squares (720 degrees).
A similar decline of two full squares from the November 169 high projects to 81.