SNAP has been a stock I’ve started to notice when flipping through some of the growth names. It is coming out of an impressive three and a half years base on solid volume. The reaction to the October 2020 earnings was fantastic, and the weekly volume during that breakout was the largest weekly volume ever. This is a fairly young chart, with an IPO in 2017, but this is finally trading above that IPO and is showing strength vs. the SPX.
SNAP comes from the Technology Sector / Internet Content & Information Industry
The relative strength of the industry is shown below:
This industry has been a market leader for most of the past 20 years. It is currently trading in a range, and the 30-week SMA of the relative strength is steadily rising during this period. I am looking for a breakout in this industry to go with a long in SNAP.
Below is the weekly chart of SNAP with the relative strength vs. SPX shown at the bottom:
This is also in a consolidation period like its industry. Coming out of that strong weekly move in October, this has had some time to digest the gains. SNAP recently pulled back to test & wick off the rising 30-week SMA.
The weekly chart below shows some targets:
I used the 5% PnF chart to come up with some targets:
Horizontal Counting Method = $96
Vertical Counting Method = $243
The vertical count will likely take plenty of time before it’s realistically achieved, but the $96 is what I’m focused on for some dated calls. I like how this has managed to hold up above the rising moving averages, and the wick of the 30-week SMA is a bonus. The initial breakout was on a massive expansion bar with very high volume, which I always love to see.
The chart above shows the ATR% at the bottom, which has historically hovered around 5%. I used that for the PnF chart settings to come up with the targets. I also added the earnings to the chart, which shows the prior 3 earnings reactions have all been positive—another plus.
I have an alert set for a break above $65.86 to consider a long call position. Above that, I would want to see a break to new ATHs $73.59 to load up even more.
I have my alerts set, and I’ll send out an update to premium members if I take any action with the call options.
Regards,
Trace