Shares of Fitbit, Inc. (FIT) occupy moved off of their lows in late June, but the rally is quickly losing steam after breaking out from the 50-day moving average. While the company still has a loyal customer base, Bloomberg reports that the loss of key employees, an unready app store, lack of interest among developers and a failed Spotify partnership could hinder its widely anticipated smartwatch launch planned for later this year.
The market for wearables – including smartwatches and activity trackers – has always been choppy. In addition to Fitbit, GoPro, Inc. (GPRO) has struggled with releasing unusual products, and Garmin Ltd. (GRMN) reported a lower activity tracker volume during its latest quarter, which was only partially offset by strong growth in advanced wearables with GPS. Even Apple Inc.’s (AAPL) Apple Watch has been underperforming early expectations. (See also: Samsung Passes Fitbit in Wearable Device Market.)
From a technical standpoint, Fitbit shares occupy been trending sideways near R1 resistance at $5.71 for the past week. The stock remains in the middle of its short-term price channel, with support near the 50-day moving average, pivot point and lower trendline at $5.30 and resistance at the upper trendline around $6.00. Despite the short-term uptrend, the medium- and long-term trends remain bearish as the company struggles on a fundamental level.
Traders should watch for a rebound from lower support at around $5.30 or a breakout from upper resistance at $6.00 on the upside. On the downside, traders should watch for a breakdown from support to S1 support at $4.91 on the downside, which could lead to a unusual 52-week and bar not any-time low for the stock. A moving average convergence divergence (MACD) crossover could predict this trend reversal over the coming sessions. (For more, see: Fitbit’s Smartwatch Project Is in Turmoil: Report.)
Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned apart from through passively managed index funds.