Shares of Snap Inc (NYSE:SNAP) in mid-August were trading more than 60% off their post-IPO (initial public offering) highs and pessimism around the stock and the company’s prospects was palpable. Since then, SNAP stock has “recovered” nearly 50%, and although pessimism remains high and the stock volatile, the charts are beginning to paint a more constructive picture in multiple time frames.
For some perspective, remember that Snap Inc came public on March 2 of 2017 and the following day printed a thus-far all-time high near $29.40. From there the stock began a vicious slide that left anyone greedy enough to jump after the stock immediately following the IPO in excruciating pain.
Generally speaking, in my experience it takes any given initial public offering stock around six-12 months or more to settle into a rhythm and for analysts to get their head around the company and its prospects. So far that also seems to be the case for SNAP stock.
So you know, Snap is scheduled to report its next batch of earnings on Nov. 7 — only its third as a publicly listed company. For the time being, this could be a major inflection point for the stock as the company has to prove itself to investors.
SNAP Stock Charts
Moving averages legend: blue – 100 day, yellow – 50 day
On the chart that stretches back to the March IPO date, we see that the rally off the August lows has resulted in the stock breaking above the black diagonal resistance line.
Not only that, but in the second half of September, SNAP stock re-tested this line from above and with the latest rally now has also overcome both its 50- and 100-day simple moving averages. From this angle, this is constructive price behavior.
Moving averages legend: blue – 8 day, yellow – 21 day
Moving over to the daily chart, we see that after an initially rally off the August lows, the stock began to consolidate and over the past few weeks created two higher lows until finally breaking to a higher high (past horizontal resistance around $15.50) last week. From here and for a trade, the $18 area is a next upside target.
Any “trading positions” should however be closed out ahead of the earnings report and the stock needs to be reevaluated after that.
Also, any strong bearish reversal from here is a stop loss signal.
Check out Anthony Mirhaydari’s Daily Market Outlook for Oct. 17.
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