Fitbit Extends Breakout After Bullish Citron Report

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Fitbit, Inc. (FIT) shares rose by more than 5% to intraday highs on Tuesday after Citron Research called the company “one of the most under appreciated med-tech stories in the market.” The popular analyst firm believes that Fitbit shares will hit $15.00 this year, which represents a 136% premium to the current market price, if the company isn’t acquired beforehand.

The stock price gains also come shortly after the company announced its Fitbit Ace wearable for kids ages eight and up. On Monday, the company announced that the new product would be available around the world for $99.95. The wearable manufacturer has struggled over the past several years, but it saw some recent strength with the launch of the Fitbit Versa, which has shipped more than one million units since the April 16 launch date. (For more, see: Fitbit Launches 2 New Wearables: Versa and Ace.)

From a technical standpoint, the stock broke out from an ascending triangle pattern earlier this month, and the rally continued through R1 resistance at $5.84 and R2 resistance at $6.26. The relative strength index (RSI) is well into overbought levels at 84.82, but the moving average convergence divergence (MACD) remains in a strong uptrend. These indicators suggest that the stock could see some near-term consolidation, but the long-term trend appears higher.

[Check out Chapter 4 of the Technical Analysis course on the Investopedia Academy to learn more about supplemental technical indicators such as the RSI and the MACD.]

Traders should watch for some consolidation above prior highs (from December 2017) at around $7.30 before a move higher. If the stock breaks down from these levels, traders could see a move all the way back down to R2 support at $6.26. The strongest support lies near the 200-day moving average at $5.97, where there’s also trendline and R1 support. That said, traders should maintain a bullish bias on the stock given the recent trend. (See also: Fitbit, Inc: How It’s Fared Since Its 2015 IPO.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

Source: Investopedia