Sofi Technologies (NASDAQ:SOFI) stock is sinking and has yet to stop. There’ve been multiple bounce attempts along the way. One was even backed by behemoth buyers and saw epic gains over two sessions. But, ultimately, every bid for a bottom failed.
Bears have reigned in SOFI stock since November and aren’t ready to give up control yet.
And it’s unfortunate because SoFi shares know how to move once an uptrend takes root.
We’ve seen three steep ascents since the fintech company came public via SPAC in late 2020. The first climb saw SOFI stock rise more than 100%. The second two rose nearly as much. And nothing brings momentum traders running quite like a cheap stock doubling.
But none of the uptrends stuck. And with the current decline, SOFI has nearly returned to its $10 starting price. There and back again in a little over a year.
A Look at SOFI Stock
Thus far, SoFi has been an OK trading stock but a terrible investment. High volatility is beneficial when you’re on the right side of the trend. Those that have had the discipline to wait for prices to enter an uptrend and then promptly exit when it ends have done fine.
The investor class has been battered about with nothing to show for it. It’s one thing to suffer through gut-wrenching volatility in exchange for above-average rewards. It’s quite another to do so and then leave with losses. And so far, it’s the latter that defines the experience of those still holding the stock.
Perhaps SOFI wouldn’t have given back so many gains (52% off of November’s peak) if it weren’t for the awful market backdrop. Rising interest rates have taken a machete to growth stocks. And it’s the more speculative area which includes SPACs and recent IPOs, that’s most hated. Consider the Defiance Next Gen SPAC Derived ETF (NYSEARCA:SPAK) chart for a detailed view of all the carnage.
It’s been cut in half from last year’s highs and is stuck in a nasty downtrend. Unfortunately, this is the environment SOFI stock has to work in right now. So if you want to feel better about the dismal performance, blame it on the general dislike to all SPACs.
Seeking the Bottom for SOFI Shares
I’ve said much about the past and present but nothing about the future. Despite the current downtrend weighing heavily on prices, there’s always a chance buyers return, a bottom forms, and a new uptrend emerges.
If history is any indication, it’s not a matter of if, but when.
And when it comes to timing, technical analysis has the best tools available. Potential buyers should wait for the price to break above resistance. It’s even better if we take out a longer-term moving average, such as the 50-day, to signal the bounce was able to push through a level that its predecessors failed at. I’m eyeing $13.50 and then $14.27 as the two critical thresholds for SOFI stock.
That said, if you’re adamant about fishing for a bottom here, then at least use naked puts to elevate the probability of winning.
The Trade: Sell the March $10 put for 75 cents.
You’re obligated to buy shares at $9.25 if the put sits in the money at expiration. If it doesn’t, you’ll simply pocket the 75 cent credit.
On the date of publication, Tyler Craig 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.
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