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Snap Earnings Preview: Can the Stock Break Out Again?

Snap stock was a great trade in the fourth and first quarters. However, it's been acting a bit tired lately. Here's how to trade it after Snap reports earnings.

I remember Snap  (SNAP) - Get Snap, Inc. Class A Report as an excellent trading vehicle in the fourth quarter.

Shares trended higher for the first few weeks of October, then erupted higher near the end of the monthly. After chopping around in November, the stock climbed toward $55 - more than double where it was trading in October.

It was on fire - but we couldn’t expect that action to last forever.

While Snap’s momentum carried into the new year, it topped out in February like most other growth stocks. On the ensuing dips, it found support from a key VWAP measure.

Although bulls have continued to pound the table due to the company’s growth, the stock has had trouble regaining momentum.

Investors are hoping that will happen after Snap reports earnings after the close on Thursday.

While Facebook  (FB) - Get Facebook, Inc. Class A Report has been the social media stock on the run to new highs, can Snap start to outperform too?

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Trading Snap Stock

Daily chart of Snap stock.

Daily chart of Snap stock.

In June, I was looking for a move from the low-$60s, up through the $65 level. We got that move later in the month, which ultimately sent Snap stock up to $70 in July.

However, the stock has not been immune to sellers and the recent dip in the overall market.

That led to an “ABC” correction, with the stock ultimately bottoming near $57.50, down about 18% from the highs.

Now pushing back up through the 50-day and 10-week moving averages, Snap stock is back to the 61.8% retracement ahead of its earnings report.

On a bullish reaction, we need to see Snap reclaim the 10-day moving average and the key $65 level. That opens the door to $70, then the high at $73.59. Above that puts the 138.2% extension.

On a bearish reaction, I would love to see Snap hold the 50-day moving average, but that’s almost certainly too tight of a leash (and too high of expectations) when it comes to a post-earnings decline.

Below this week’s low and the 200-day moving average is on the table, along with that weekly VWAP measure that’s been supporting Snap stock for the last nine months or so.

If we get a prolonged pullback in the stock, $48 range support could be on the table. However, I’m not expecting a post-earnings decline to that area -- only if there’s a strong and deep correction in the broader market.