- SoFi Technologies (SOFI) shares closed at an all-time low Wednesday, bringing the year-to-date losses to 56%.
- Its low share price is a siren song beckoning to bargain hunters.
- There’s no evidence of a bottom, so I suggest steering clear.
I want to like SoFi Technologies (NASDAQ:SOFI). But its death spiral disallows it. The San Francisco-based personal finance company has many characteristics I look for in a trading vehicle, including a cheap share price and a wide array of option strikes to choose from. What’s more, the liquidity is fantastic, with daily trading volume frequently topping 50 million shares. SOFI stock options boast juicy premiums and tight bid-ask spreads too. But despite all that, its share price can’t find a bottom.
And that’s a severe problem for one that finds bear trades not worth the effort.
Since launching into the public arena in late-2020, hype and promise have surrounded the disruptive fintech company. Unfortunately, the promise has proven hollow, and its share price is circling the drain. It doesn’t matter how much potential a new company has. If it doesn’t translate into price performance and gains for shareholders, then it’s ultimately irrelevant.
Let’s talk about why the SOFI stock chart should scare bulls away.
The Sinking SOFI Stock Chart
Here are three stats to set the tone. SOFI stock is down:
- -75% from its high
- -56% for 2022
- -37% from its initial $11 print.
The share price is steeped in a downtrend, complete with falling moving averages across all time frames. The 20-day and 50-day have sat heavily atop the stock, rejecting every rally attempt this year. It’s not that SOFI stock can’t rally. It can, and it has. But they never last. The stock entered April flirting with $10. Now, it’s trading with a six-handle in a mere three weeks. If the message from price weren’t convincing enough, consider the added alarms ringing in volume. We’ve seen a deluge of distribution throughout the month, showing big sellers heading for the exits.
The only bullish thing I can say about SoFi is that its share price is oversold and due for a rebound. However, with a history of nearly a dozen straight failed rallies over the past six months, you’ll forgive me for my lack of faith in the next one that arrives.
This year’s failure to launch hasn’t been unique to SoFi. It’s a symptom of a bigger problem. The one thing that Wall Street hates more than growth stocks right now is unprofitable growth stocks. For evidence of the loathing, cast your eyes on the performance of Ark Innovation Fund (NYSEARCA:ARKK), which illustrates nicely just how much investors are fleeing from growth-related names.
If you think SoFi can’t fall further due to its already low share price, think again. A trend in motion stays in motion. Wednesday’s plunge in Netflix (NASDAQ:NFLX) shares provides a cautionary tale. The stock was down 50% from its peak right before sellers shaved another 35% off in a single session.
Give Me a Change in Character
No one knows the eventual catalyst that could pull SOFI stock out of its tailspin. But the turnaround will be a story that plays out in the chart, not the news headlines. I suggest waiting for definitive signs that the bottom is in and a new uptrend has emerged. If SoFi finally lives up to the hype, you won’t have to be the first to capitalize.
Classic signs of a bottom include slowing momentum, double bottoms, higher pivot lows or an inverted head & shoulders, and, most importantly, a break above resistance so complete and confirm the downtrend is dead. If you don’t want to fuss with the pattern recognition, simply wait for a close above the 50-day moving average.
Until then, bullish trades lack good odds.
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.