The two stocks are:
What happened this week:
GoPro (GPRO) reported a loss of $30.5 million in its second quarter but look at how the stock reacted. This is weekly chart below:
It was not the loss but the fact that GoPro said that this quarter saw a 39% reduction in inventory from last quarter and that its main product HERO5 Black was the best-selling digital image camera in the U.S. in the second quarter got the market participants excited. Investors were happy to see that company is back to focused execution. On Chart - the stock has managed a large candle move above 20-week ma. Is stock now buy? Well too early to conclude that.
Fitbit came out with unimpressive results. There was slight bump in sales but overall picture looked bad but here's how the stock reacted to the earnings report: This is daily chart
This is how it looks on the weekly chart
There is a market expectation that Fitbit will emerge as the leading player in the SmartWatch space and will challenge Apple Watch. Fitbit is positioning itself as Health and Fitness Device and there is a huge market for it.
The Big Question: What should one do when the market becomes excited in a beaten down stock?
It's always a tough call. All one can do to begin with: Start watching the stock again and see how it behaves. Turnaround path is very long and bumpy and it's never a great idea to jump at the first sign of turnaround expectation because turnarounds can be very messy for long time. Here's Groupon stock trying to turnaround
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers