Snap, Earnings, and Pop!

By | February 6, 2019

Snap (SNAP), the nine billion dollar emoji application company, reported in-line earnings after the bell on Tuesday and shares soared over 21% in after-hours trading.

February has been a great month for Snap since the it became a publicly traded company two Februarys ago. Shares soared about 60% in the IPO week of trading in February 2017, and they jumped over 50% in the first two weeks of trading in February 2018.

In what what turned out to be a platform for this month’s earnings pop, Snap shares began forming a rudimentary base in October last year. The technical indicators on the weekly timeframe began moving higher two months later.

On the daily timeframe the basing process resembles a saucer or rounded bottom. Initially, resistance was situated at $6.50, but that level was broken at the end of last week. The next level of resistance was positioned at $7.50, but it will be left in the dust when the stock opens this morning.

The opening gap higher should take shares to around $8.50, but any near term follow through will meet resistance at the intersection of the horizontal trendline located at $9.50 and the 200 day moving average.

It is easy to dismiss Snap’s nearly 21% earnings pop as a market over-reaction. But the technicals have been improving as the base was forming and recent volume levels have spiked. Aggressive short sellers should be cautious.

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