It’s new to the market, but SoFi Technologies (NASDAQ:SOFI) is already looking like a classic for today’s investors. Let’s check out what’s happening off and on the price chart in SOFI stock and offer a risk-adjusted determination aligned with those findings.
Fintech SoFi is new to the public market this month. But as a $8.65 billion SPAC deal merged with former Facebook (NASDAQ:FB) exec and well-regarded institutional investor Chamath Palihapitiya’s blank-check Social Capital Hedosophia Holdings V, the outfit has a history with investors that’s quickly living up to its pedigree.
To be fair, Chamath isn’t the Wizard of Oz. Still, he is the man behind the curtain for top SPACs Virgin Galactic (NYSE:SPCE), Opendoor Technologies (NASDAQ:OPEN) and Clover Health (NASDAQ:CLOV). They’re a diversified lot of highly-successful companies. And that should have investors’ attention.
Under the Hood of SOFI Stock
Today and departing the space tourism business and online real estate and the Medicare markets, SOFI stock offers investors the chance to invest in a disruptive, holistic financial platform.
So what’s SOFI have under its hood? The fintech offers clients access to a portfolio of diversified loan products, stock and crypto trading, wealth management and robo-advisor services under its digital-first ecosystem.
Moreover, it’s working. SOFI is firing on all cylinders everywhere you look.
Over the past year has more than doubled its members to roughly 2.3 million. And from that base, which grew 23% during its first-quarter, SOFI delivered guidance-busting net revenue of $216 million. This easily topped the company’s forecasted sales range $190 million to $195 million when it reported results in May.
Looking forward, SoFi’s management reiterated its full-year outlook calling for sales growth of 58% compared to 2020 on revenues of $980 million. SOFI also expects to achieve adjusted income of $27 million for 2021. There’s more too.
While business appears healthy and moving along nicely, a forward-looking stock market is also pointing toward strong future results from SOFI stock based on its price chart.
SOFI’s Weekly Price Chart
Source: Charts by TradingView
It’s a classic in the world of growth stock investing. It’s called a corrective cup with handle base and it’s working on its finishing touches in SOFI stock. And for bullish investors that want a breakout play with the odds stacked in their favor, SOFI deserves a spot the short list of buys of this kind.
Technically and as the illustrated weekly chart reveals, SoFi’s smaller handle consolidation has just entered its third week of construction. Development is occurring within the right side of the larger base and finding support off the 50% retracement level. At the same time, pattern resistance has formed at the 76% Fibonacci level.
Altogether, the construction of SOFI’s cup with handle is visually attractive for a nearby breakout and pending buy decision in SOFI stock if shares proceed to clear the high of handle.
Less characteristically of the cup-with-handle base, the handle’s depth of nearly 25% is wide by textbook standards of around 10%. More importantly , overall pattern volatility of both the cup and handle are observably congruent. And in this strategist’s estimation, that’s the overriding factor in setting up SOFI as a strong-looking cup with handle breakout candidate.
For now and as determined, SOFI simply needs to be monitored for a bullish reaction through the handle before action is taken. I’d also suggest a purchase on the condition SOFI’s stochastics indicator isn’t pointing lower in a bearish crossover pattern.
At the moment, stochastics is in overbought territory, but bullishly aligned. It could be a warning of pending weakness. But maybe not.
Without being too hopeful, in this type of situation, the secondary indicator could just as easily remain overbought during a momentum phase, which a breakout is a key trigger for. As stressed though, a change of character in stochastics could be problematic for the handle’s success. And bottom line, that means there’s no reason to second guess it with a more dicey-looking SOFI purchase.
A Trade in SOFI Stock
More upbeat, if and when those conditions in SOFI are met and should they play out in the next one to two weeks, I’d suggest the August $25/$30 bull call spread as a well-positioned, leveraged and risk-controlled way to go long a volatile SOFI stock with improved odds for success.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.