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  • RBLX shares reached all-time high on May 27.
  • RSI shows stock is slightly overbought.
  • Valuation shows no signs for worry.

Shares of RBLX have spiraled higher this week to close up 18% since last Friday. Now at an all-time high, can RBLX shares end the week on another high note, so to speak? Shares are up 0.7% in the premarket on Friday at the time of writing.

RBLX technical analysis: RSI now overbought

Roblox (NYSE: RBLX), a standalone leader in DIY video game programming for children, has witnessed a major swing high this week. After trading in a band between $60 and $84 since its direct listing on March 10, RBLX shares secured a hesitant close one week ago, May 21, just ahead of the swing high close from April 13. Since Monday, May 24, however, RBLX shares have been on a tear, witnessing higher highs each subsequent day this past week. On Thursday, the stock jumped another 8.7% to close at $97.47.  

Now RBLX shares are in price discovery mode, since it has never reached this price level in its short history. The only barrier at this point is the psychological resistance at $100. Having already experienced selling pressure on Tuesday and Wednesday of this week, May 25 and 26, and storming past it on Thursday, Friday’s session should expect more buying.

For the first time in its public company history, Roblox shares are now in overbought territory since crossing to 72 on the Relative Strength Index (RSI) on Thursday. This may give traders some sheepishness, though it is hard not to be optimistic. In three months shares have not once even traded below 40 on the RSI. This is a sign that the market is not keen to sell-off. Additionally, the daily chart displays a bearish shooting star candle on Wednesday followed by a bullish engulfing candle on Thursday. This pairing typically predicts more upside to come. If the price was to drop, the 20 and 9-day SMAs sit at $76.22 and $83.52, respectively.

RBLX Valuation: Not that expensive

At $55.5 billion, RBLX may seem overvalued. Afterall management is only forecasting revenue of $1.48 billion this year. But when you take into account that revenue is already expected to grow at close to 60% this year and that analysts are projecting revenue of $3 billion for 2022, the share price makes more sense. This is afterall just 18 times 2022 revenue, rather cheap when compared to other upstarts in the industry like Unity Software, which trades at 23 times next year’s revenue.

Lastly, with more than 35 million daily average users expected for this year, one can see why Roblox has made so many heads turn. Management’s strategy of entering China this year is making many mouths water. The optionality of a video game development platform gives many analysts and traders the hint that it might be better to value the company like a social media company, which routinely command valuations above 30 times revenue in their early incarnations.

RBLX daily chart