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How Snap Shares Can Break Out From Here

Snap has been trading pretty well vs. its high-growth peers. Here's how to trade the potential breakout.

Some of the leading social media stocks have been the best performers lately. While Snap  (SNAP) - Get Report is off its highs, it shouldn’t be ignored.

It’s the best-performing social media stock over the past month, slightly edging out Pinterest  (PINS) - Get Report. It’s also the best-performing stock in the group so far this year, slightly edging out Facebook  (FB) - Get Report.

The question is whether that outperformance can continue.

When Snap reported earnings in late April, the company beat profit and revenue estimates, with the latter growing 66% year over year.

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The report resulted in a slew of price target hikes from the analyst community. A few weeks, the company announced it hit 500 million active users and partnered with Poshmark  (POSH) - Get Report.

Despite all of the good news, shares only put together a meager rally before turning lower in May amid a bear market in growth stocks.

However, there was a silver lining.

Snap stock outperformed many of its peers despite falling almost 35% from peak to trough when it bottomed in March. Importantly, it didn’t break to new lows in May like most other growth stocks.

After a strong bounce from the lows, shares are trying for a larger rotation to the upside.

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Trading Snap

Daily chart of Snap stock.

Daily chart of Snap stock.

Snap broke out over $48 in December and traded between that level as support and $55 as resistance.

While the ceiling has been raised - to a new range resistance of $65 - the floor has remained the same, with range support coming into play between $48 and $50.

When I mentioned its lows in March, these came into play around $48. Snap also had the support benefit of the rarely followed weekly anchored VWAP measure. That measure again acted as support during the May pullback when Snap was under pressure but not retesting its lows.

So what now?

Snap stock flirted with a monthly-up rotation at the start of the month, with a move over $62.65. However it failed to hold up over that price.

On the plus side, the 10-day moving average continues to act as support. From here, I’m looking for another push back above $62.65 and potentially a weekly-up rotation over the current June high of $63.84.

If we get it, it puts $65 range resistance in play, and with it, the potential to breakout up to the highs near $73.60.

On the downside, see that the 10-day moving average continues to hold as support. If it doesn't, it puts the 21-day and 50-day moving average confluence in play.

If the selling pressure really picks up, the weekly VWAP could be back on the table.