Did Fitbit Just Establish A Trend Change?

According to Trade-Ideas, Fitbit Inc FIT has been exhibiting a “possible trend change pattern.”

Related Link: A Timeline Of Fitbit's 56% Fall In 2016

The recent decline seen in the stock is “an overreaction to lower earnings guidance,” the site said. Actually, knowing that the market’s reactions can be extreme some times can help investors find opportunities, especially when shares bottom out like Fitbit, GoPro Inc GPRO or Groupon Inc GRPN did recently.

In addition to this, Trade-Ideas noted that 85 percent of Fitbit’s float is currently shorted – and this is not a minor detail. Out of the almost 20 million available shares, “the vast majority are ready to start buying their shares back from its high $51.90 from August 5th,” they added.

Related Link: Fitbit Fatigue: Analyst Sees 50% More Downside

“This tell tale sign of a huge squeeze will create fuel for a significant movement up as the shorts buy back their shares and take profits,” the site explicated. So, it makes no sense to speculate on the downside right now; that play has already been performed. Actually, the only sensible thing to do now is wait, they concluded.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.