Trade plan and ROKU update

Hi premium members,

This is a quick update on how I plan to trade this week and how I’m managing our current ROKU position.

The Fed will announce its interest rate decision tomorrow. That decision, along with Jerome Powell’s comments (and even his tone), will likely swing the market in a big way in either direction.

Whenever a big Fed announcement looms, I prefer to wait until after investors’ emotions cool off before entering new trades. That’s what I’m doing this week, but I hope to open at least one new position by Friday.

ROKU crashed as much as 10% last Wednesday on literally no news from the company.

Why then did the stock plummet?

Blame Comcast. That company’s earnings report showed a loss of 500,000 subscribers at Peacock to 33 million paid subscribers.

What does this have to do with Roku?

The company is both a streamer and a reseller of other streaming services. Investors got spooked because if consumers aren’t adding streaming outside of Netflix and Disney, there won’t be much growth for Roku.

This puts our position in a tough spot. The stock closed at 57.44 today, and we need it to rise above 65 by Aug 16. That’s quite a bit of ground to make up.

That leaves us with two choices:

1. Close the trade now and cut our losses.

2. Leave it open and see if it rebounds.

Let’s talk about the second option first.

There is one big catalyst that could turn our trade into a winner. Roku announces earnings on Thursday. Historically, the stock has moved quite a bit after these reports.

If investors like what they read and hear, I won’t be surprised if ROKU leaps 10% or more in a day and continues to rise over the next few trading sessions.

If, however, Roku disappoints, the stock will almost certainly crash even more.

So what’s the plan?