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Here’s How to Trade the Snap Inc Earnings Melt-up

Sell SNAP puts to buy shares on a dip

By Tyler Craig, Tales of a Technician

Snap Stock: Why Would Its CFO Resign So Abrutly?

Source: Shutterstock

Disappointment has plagued Snap Inc (NASDAQ:SNAP) ever since its early-2017 IPO. Underwhelming earnings and weak technicals have kept all the bulls at bay. With a rip-roaring equities market lifting everything under the sun, profit-hungry traders have had little reason to fiddle with SNAP stock.

Until today, that is.

Yesterday the Snapchat creator delivered an earnings announcement finally worth cheering. In an impressive turnabout, SNAP stock soared more than 40% on the day, cracking through resistance levels aplenty.

Here’s my technical take.

Here's How to Trade the Snap Inc Earnings Melt-up
Source: OptionsAnalytix

For starters, SNAP stock’s history is littered with failed rebound attempts. We’ve seen the stock climb above the 50-day moving average numerous times only to be rejected like a love-stricken teenager. This time, however, is different. Consider the volume for instance. By day’s end, 232 million shares had changed hands making it the most active trading session ever. Dwarfing the volume seen during a company’s IPO day is no small feat and it signals a titanic-sized shift in perception for SNAP stock’s destiny.

The next few resistance zones worth eyeing are $22, $24 and $29. Overhead supply could come in on a re-test of each zone. While it remains to be seen how far buyers can push the current upswing, one thing remains clear — you should view future price dips in SNAP stock as buying opportunities.

Get Paid to Buy SNAP Stock

Rather than wait for a pullback before striking, we can sell puts to get paid for our willingness to buy SNAP at a discount. Sell the March $17 put for 65 cents or higher. If the stock remains above $17 for the next month, you will capture the 65 cent credit. And if the stock ends up retreating below $17, you will be obligated to buy shares at a cost basis of $16.35, which is a 23% discount to yesterday’s high.

Of course, if you’d rather not acquire shares you could simply exit the trade if Snap Inc. falls below the put strike at $17.

As of this writing, Tyler Craig held bullish positions in SNAP. Want more education on how to trade? Check out his trading blog, Tales of a Technician.

Article printed from InvestorPlace Media, https://investorplace.com/2018/02/snap-inc-earnings-melt-up/.

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