Put SNAP Stock on Your Shopping List
Last week Snap (NYSE:SNAP) stock sported a bullish posture and experts on Wall Street took notice. The SNAP stock rhetoric was that it was headed for a pop.
Source: ArthurStock / Shutterstock.com
All that may have changed on Friday when the stock markets in general violently fell 2% on a tweet storm from President Donald Trump, who took the economic war between the U.S. and China to a new level. Needless to say, hopes of successful negotiations drastically diminished after the presidential tweets.
Even though this morning the White House is trying to walk back some of those comments, the fear from here is based on uncertainty. All U.S. imports from China will be taxed either 15% or 30% soon and it could get worse at any moment, just like what happened on Friday.
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
The bottom line is that for now, individual stock upside opportunities like the one in Snapchat stock are hostage to geopolitical macro headlines. Prudence reigns and this is a time to keep an eye on the opportunities, but be patient with the entry positions until the knee-jerk headline effects on the stock market abate.
The Good News for SNAP Stock
The good news is that we still have the Federal Reserve committed to preventing the U.S. economy from falling into recession. Fed Chair Powell reiterated this on Friday morning minutes before things went bad. So the overall thesis should still be bullish for stocks. For now the outcome of SNAP stock price is binary due to the headline risks.
This, however, should be a short-term phenomena. Today we review the opportunity in SNAP stock assuming that the headlines are transitory. Although this is not the time to add a whole bunch of risk all at once, it is OK to compile a shopping list, and perhaps nibble on a few good-looking charts on dips.
SNAP Stock Moving Forward
Fundamentally SNAP stock is not cheap. The company still loses money and it sells at a whopping 15 times its sales. Compare that to Amazon (NASDAQ:AMZN) or Twitter (NYSE:TWTR) who sell at 3.7 and 10 times sales, respectively. So conviction should be low because it has so much fat it can still shed off the bone.
The bullish thesis on SNAP stock price now relies heavily on faith that it will continue to growth fast. So far, this is not a sure thing. By definition the investments in Snapchat stock are speculative.
Technically, there was a clear trigger to enter a long position in SNAP near $12 per share. The pattern targeted and played out perfectly into the $18 to $20 zone. The pattern ended in a spectacular way. After reaching $16 per share, the stock faded to $14. Then earnings came out and Wall Street loved it. As a result, SNAP stock spiked almost 30% to finally reach the target set in late May.
SNAP can still fulfill the upside promise from last week but it will need the help of the overall markets. The danger is that it also has an open gap below near $15 per share. And if the overall market rhetoric continues to be negative it should get there pretty quickly. But then the bulls have a $1 zone from there to defend the ascending stock pattern of higher-highs and higher-lows.
This week, if SNAP loses $15.50, it could lose another 50 cents but then the bulls have a $1 range to put in a stand. It is hard to guess the outcome when the whole markets are moving up and down so violently on reasons independent of SNAP.
Bottom Line on Snapchat Stock
Over the next couple of days and out of the G7 meetings, geopolitical headlines will rule sentiment on Wall Street. The stock bulls will need help from headlines. Currently the bullish sentiment is dying from a thousand cuts. Some of these wounds will need to be addressed so that buyers could buy the dip.
There will be opportunities resulting from this crisis of sentiment, and if SNAP stock can hold technical lines it too can be part of the shopping list. Otherwise I would wait for a little more clarity as the major neckline for this last 50% rally still lies well-below current levels near $13 per share. While this is not a forecast, it is a potential scenario that exists today.
Caution and patience are virtues in this headline-palooza of a market. I never risk more than I can afford to lose.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here.
More From InvestorPlace
The post Put SNAP Stock on Your Shopping List appeared first on InvestorPlace.
