Momentum Traders Drown On GoPro

Joel Elconin is the co-host of Benzinga's #PreMarket Prep, a daily trading idea radio show.

GoPro Inc GPRO shares were trading lower by $4.15 (more than 7 percent) at $46.77 in Wednesday's session. One day removed from nearly $5.00 rally, the issue is now well under the psychological technical level of $50.00.

After a $1.00 lower opening, momentum traders (an investment style that aligns investors with securities that are reacting to sentiment with the goal to take advantage of any short-term or long-term opportunities provided by the prevailing trend) that piled into the issue over $50.00 were immediately under water.

When realizing being trapped in a false breakout, this crowd quickly exits the trade and exacerbates the selling frenzy following the open. In addition, sell stops (an order placed with a broker to sell security when it reaches a certain price) may have added to the decline, as other investors attempted to lock-in profits from rally off its February 10 low ($42.65).

So far, GoPro has been able to find support ahead of Tuesday's low ($46.00), only reaching $46.53. However, it has not been able to distance itself from the current low, only rebounding to $47.26 before resuming its decline.