How To Trade SNAP
Here’s a look at the newly public social media video platform following its first earnings report as a public company after yesterday’s close.
The short of it (no pun intended… well not really anyway) is that the numbers and fundamental metrics were not good.
The Trader Says
After pricing at $17 per share, opening at $24 per share and topping at $29.44, SNAP is dangerously close to breaking the IPO price. This after reporting worse than expected earnings and metrics the first time out.
The savvy simple trader wouldn’t have been caught dead in this stock to begin with…
So how to trade SNAP now?
The short answer is…
The stock chart was negatively structured before yesterday’s dismal results…
It remains so despite the enormous gap now open up to that first horizontal line of resistance.
If the structure alone isn’t reason enough to avoid buying the stock… The confirming price behavior is.
The only reason to buy the stock here is you know something you shouldn’t (legally)… In which case, the answer remains the same…
Don’t buy the stock.
So why not short SNAP?
The company is hovering near its IPO price. There are likely to be a number of defenders of the at this price… not least of which will be the issuing investment banks. They’re loathe to allow one of their issues to break it’s IPO price, so they’re likely to come into the market to defend the stock (buy it) the closer it gets to $17.
Furthermore, the stock is not worth zero… Some buyers will wade in to just take a shot at some point given what Facebook did and continues to do. Note: Don’t be one of these… SNAP is not what FB was at this point in it’s history.
As such, and given my longstanding prohibition against all but the most talented short sellers getting short individual stocks, I suggest you stay away from the short side.
So where would I consider buying the stock?
I’m not a big fan of 1 trick ponies which is what SNAP seems to be at the moment. That said, on a chart basis, I wouldn’t even consider a long unless price can get up through (and stay above) $24.90.
Hope it helps…