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How to Trade Snowflake When It Releases First Earnings Report

Snowflake will report its first earnings report since going public. Here's a look at the key levels investors must know.

Snowflake  (SNOW) - Get Snowflake, Inc. Class A Report went public in mid-September, bringing plenty of attention with it. Now it’s set to release its first earnings report as a public company.

In the lead-up to going public, investors saw the company’s valuation climb quickly.

The stock began pricing around $80, then moved up to $120 by the time of the initial public offering. Shares then opened for trading all the way up at $245.

In its first day of trading, Snowflake traded with a low of $231.11 and a high of $319. For such a wide range, it closed with $9 of its opening price, ending the day at $254.93.

Helping drive the surging stock price was Berkshire Hathaway  (BRK.A) - Get Berkshire Hathaway Inc. Class A Report undefined and Salesforce  (CRM) - Get, inc. Report, which both took a stake in Snowflake ahead of its IPO. Salesforce just reported earnings and announced its acquisition of Slack  (WORK) - Get Slack Technologies, Inc. Class A Report.

In any regard, investors want to know what Snowflake stock may do when it reports. Let’s look at the charts.

Salesforce is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells CRM? Learn more now.

Trading Snowflake

Daily chart of Snowflake stock.

Daily chart of Snowflake stock.

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Gauging expectations for this name is rather difficult. On the one hand, the stock is up massively since going public. Further, leading up to the stock’s high on Nov. 30, Snowflake rallied for eight straight sessions before hitting its high on the ninth session and reversing lower.

Shares ultimately gained 48.5% during that run, although we’ve now seen a three-day dip to the 10-day moving average, where shares shed 15% at Wednesday’s low.

Is that enough cooling off for the bulls?

We’re getting a nice bounce out of Snowflake stock today, but a binary event like earnings has the potential to move the stock significantly in either direction.

If the reaction is bullish, look for Snowflake to reclaim the IPO high near $320. If it can do that, it may challenge the all-time high up at $342.

If we want to talk about extensions from the September low to the IPO day high, the 138.2% and 161.8% extensions come into play near $361 and $387, respectively.

If the reaction is muted, I think the bulls secure a win by keeping this stock north of the 10-day moving average and above Wednesday’s low. Above the October high is even better.

If the reaction is bearish, I want to see $270 hold as support. There the stock finds its 20-day moving average, as well as the breakout area from last week. Below will put the 50-day moving average in play.

If shares move below the 50-day, then range support near $230 is on the table.