How to Trade Snowflake After It Reports Earnings

Snowflake was a huge winner after going public but lately it's fallen out of favor. Can it regain its prior momentum?
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Snowflake  (SNOW) - Get Report really grabbed Wall Street’s attention in September when it went public. Will it do so again when it reports earnings? 

The company’s initial public offering price was expected to be high but not many thought demand would be through the roof.

Let’s remember that when Snowflake went public on Sept. 16, the market was in the midst of a steep pullback. But buyers weren’t shy with this one.

Investments from Salesforce  (CRM) - Get Report and Berkshire Hathaway  (BRK.A) - Get Report  (BRK.B) - Get Report dialed up the hype, as its IPO range climbed from $75 to $85, then to $100 to $110, before settling at $120 a share.

It didn’t matter. Shares opened for trading at $245 before ultimately rallying all the way up to $429.

Now down about 40% to $255, investors are wondering if Snowflake can regain some of that momentum after it reports earnings after the close.

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Trading Snowflake

Daily chart of Snowflake stock.

Daily chart of Snowflake stock.

There’s a lot to unpack with this chart and recent IPOs are always difficult. Thankfully, we have several months under our belt with Snowflake stock, as well as one fantastically received earnings reaction in December.

The last time the company reported, shares responded with a one-day rally of 16% followed by another 14% rally the next day. It’s also what fueled shares to a record high.

The tune has changed considerably, though.

Snowflake has gone from a stock that was bought on the dip to one that’s being sold on the rips. It’s key moving averages that were support are now resistance.

The $266 level had been key in 2021, but has failed in recent trading, while the 10-day moving average pressures shares lower.

Last week’s low looms large, down near $243. If the post-earnings reaction is bearish and Snowflake moves lower, watch to see if $243 is broken and if so, if it’s reclaimed.

If $243 is broken and not reclaimed, the $225 to $230 area is potentially in play. The 161.8% extension of the downside measure comes into play at $226.

An overshoot of this area could have the $210 area in play, as well as the current low at $208.55.

On a bullish reaction, we need to see Snowflake reclaim $266 and the 10-day moving average, but that shouldn’t be hard if bulls really want this name.

The more troubling spot comes into play between $290 and $300. There it runs into the 21-day, 50-day and 100-day moving averages, as well as a VWAP measure. Just above is the $303.50 pivot from December.

Should Snowflake take out this zone, the February high is next in line near $327, followed by the 61.8% retracement near $350.