I remember Snap (SNAP) – Get Report as an excellent trading tool in the fourth quarter.
Shares soared higher in the first few weeks of October and then broke higher towards the end of the month. After chopping around in November, the stock climbed to $55 – more than double where it traded in October.
It was on fire – but we couldn’t expect that action to last forever.
As Snap’s momentum entered the new year, it peaked in February, like most other growth stocks. On subsequent dips, it found support from a key VWAP measure.
While bulls continued to pound the table as the company grew, the stock struggled to regain momentum.
Investors are hoping this will happen after Snap reports post-close gains on Thursday.
While Facebook (FB) – Get Report is the social media stock on the run to new highs, can Snap also start to outperform?
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Trading Snap Stocks
In June, I was looking for a move from the low $60 to the $65 level. We got that move later in the month, eventually pushing Snap stocks up to $70 in July.
However, the stock has not been immune to sellers and the recent dip in the overall market.
That led to an “ABC” correction, with the stock eventually bottoming out near $57.50, about 18% lower than its highs.
Now up through the 50-day, 10-week moving averages, Snap stock is back to the 61.8% retracement ahead of the earnings report.
In a bullish reaction, we should see Snap win back the 10-day moving average and the key $65 level. That opens the door to $70, and then to $73.59. Above that comes the 138.2% extension.
On a bearish response, I’d like to see Snap hold the 50-day moving average, but that’s almost certainly too tight (and over-expected) when it comes to a post-profit decline.
Below this week’s low, the 200-day moving average is on the table, along with that weekly VWAP measure that has supported Snap stocks for the past nine months or so.
If we get a sustained pullback in the stock, there could be $48 range support on the table. However, I don’t expect a post-gain decline in that area – only if there is a strong and deep correction in the broader market.