I have never been a big supporter of Snap (SNAP - Get Report) stock. The valuation has been absurd compared to peers like Twitter (TWTR - Get Report) and Facebook (FB - Get Report) and the financials are unattractive as negative cash flow continues to bleed the company's coffers.
However, most stocks can only remains a "sell" for so long. Now that Snap stock finally has some wind in its sails, is it a name that investors need to consider on the long side?
There's a difference between investing in the fundamentals and trading the charts. We're doing the latter, and Snap is finally looking much better. Let's examine.
Trading Snap Stock
Snap stock has been on an absolute tear, rising more than 100% from its December lows. Once it cleared $7 in February, it's been a nonstop flurry of buying. This gap-and-go has created a ton of bullish momentum in the stock. As long as Snap continues to digest these rallies and absent any horrendous news, the share price can continue to drift higher.
I wouldn't be surprised to see Snap stock rally into its earnings report on April 23, then perhaps selloff afterwards. Conversely, a consolidation/pullback period ahead of earnings could setup a post-earnings rally.
Right now, though, we have some great levels to measure against. Snap stock is technically overbought, but only in a minor way. It can certainly continue higher if bulls choose to bid up this name. On the upside, the 61.8% retracement for the 52-week range has kept Snap stock in check. However, should this level give way, it could pave the way for a rally to channel resistance, up between $13 to $14, depending on how one draws their channel lines.
It would not be the worst thing to have a one- to three-day pullback in Snap stock into uptrend support or the 20-day moving average before pushing through this 61.8% mark. This will allow Snap to shake off some of that overbought condition and give it more strength to charge through resistance.
Below $10.40, which happens to roughly be the 50% retracement level, and Snap stock may need to digest a bit more. This may include a test of $10, or perhaps even the 50-day and 200-day moving averages. Above $10.40, though, and bulls are OK.
Snap closed up 4.96% to $11.84 Friday.
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