SNAP, the New Market Darling.
SNAP - historical move since Debut
SNAP, a social networking site similar to Facebook that made its debut last March 2, 2017 (2 years ago) seemed to have come up to a stage that it has something to prove eventually (See Fig. 1
SNAP on a weekly chart). A day after its historical high of of $29.44 last March 3, 2017 it just kept plummeting until it reached $4.82 last Dec. 21, 2018 (See Fig. 2
SNAP on a weekly chart).
SNAP - Making series of Gap Ups after bottom
From that price bottom of $4.82 SNAP started moving upward until breaking out of 200EMA, creating 3 series of Gap ups (
Feb. 6, 2019, Mar. 14, 2019, and April 8, 2019) until it retested the support of 200EMA last May 13, 2019.
SNAP - Reaching 2nd New 78 Day High - 4th Gap Up
Yesterday, a significant volume occurred of around 140M shares compared to the usual trading volume of 56M shares. Such share was accompanied with a strong Gap Up price move from $14.93 jumping to a high of $17.61 and closing at $17.61 too. No sign of selling pressure. And SNAP indeed just made a New 78 Day High (See Fig. 4
"2nd New 78 Day High [N78] - 4th Gap Up Move"), with a very strong News that was released on yahoo finance that it surprised everyone with its 2nd quarter report showing a Daily Active User (DAU) rising to 203M on average for the last 3 months. That is a huge increase of user base to 13M. See News from yahoo Finance "
Where did Snap's 13M New users come from?"
SNAP - with Few Fundamentals Laid out
I have been laying out some fundamentals on the chart of SNAP (See Fig. 5 "
SNAP with some Fundamentals attached") using Tradingview.com and are here those entries:
- 2018/10/24 10-Q
Net Loss: -325K/2018 vs -443K/2017
Revenue: 298K/2018 vs 207K/2017
Cash: 350K/2018 vs 334K/2017
- 2019/02/06 10-K
Net Loss: -1.2M/2018 vs -3.4M/2017
Revenue: 1.2B/2018 vs 824M/2017
Cash: 1.2M/2018 vs 2M/2017
- 2019/02/22 10-K
Net Loss: -3.4B/2017 vs -514M/2016
Cash 2B/2017 vs 987M/2016
Revenue: 824M/2017 vs 404M/2016
- 2019/04/24 10-Q
Net Loss: -310M/2019 vs -385M/2018
Net Cash in Operation:
-66M/2019 vs -231M/2018
Revenue: 320M/2019 vs 230M/2018
SNAP = Technical + Fundamentals + Market Sentiments
SNAP = Market Darling
Based from the fundamental figures, the revenue is increasing and the Net Loss is decreasing. If you couple these fundamentals with an increase of a huge Daily Active Users and SNAP is able to monetize this New User base then that is of course a huge revenue source for SNAP. According to Yahoo Finance SNAP has 90% of 13- to 24-year-olds in the U.S., U.K., France, Canada and Australia that Facebook do not have. This age group is the so called Gen Z, that utilizes Snapchat for almost everything, be it messaging a friend, exchanging of photos and even planning. Snapchat was able to capture this age group through their rigorous innovation of their application, which eventually lead to this numerical increase of Daily Active Users. See Yahoo Finance News
"This is the No. 1 thing Snapchat has to overcome"
From the technical perspective of New 78 Day High to its fundamental perspective as well as elements in the sphere of market sentiments it seemed we have as what the Motley Fool calls it "Market Darling". They mentioned this in their report in yahoo finance, "
3 Reasons Snap Stock Didn't Crash on Earnings." And here are those 3 reasons of which the 3rd one is what I just mentioned earlier:
- Accelerating Growth. They specifically said this as "blowout performance" where in SNAP had an amazing revenue growth of 48%.
- Platform popularity. From 186M DAU (daily active users) of 2018 4th Quarter to 190M in the 1st Quarter of 2019 to an astonishing 203M DAU currently.
- A Market Darling. Investors are cashing in with SNAP's rebound after its bottom. SNAP had already tripled in price just in the 1st half of 2019.
Based on the chart itself, we have seen an ascending number of buying volume. Is this a sign of a bullish move from the institutional buyers? Probably it is, with all the figures flaunting positively with everyone. Will you miss the ride? Or will you ride on the shoulder of the giants? Maybe these giants have seen something greatly bullish in
SNAP's turn around of which the Market Realists are mentioning heavily on their report. Watch Out!
Planning for entry.
If we analyze carefully the pattern exhibited in Gap Up 4 is similar to Gap Up 2 (See Fig. 6 "
SNAP Gap Up 4 similar to Gap Up 2") that occurred last March 14, 2019. Often in trading, history repeats itself. If you are familiar with the move of SNAP, you will gain advantage once you see similar moves that you already know. In this case, what we see after the gap the price came back to close the gap after 41 trading days and eventually breaks out to a new high from the Darvas Box after another 15 days. If we are looking a potential move something like this, Oct. 1, could be the potential close out of the Gap and Oct. 11, 2019 could be the potential breakout to a new high.
Plan to enter on Pullbacks.
Now that we have a winning stock, all we have to do is to make sure we enter on its pullbacks. If you notice the Regression Channel where the Highs and Lows of SNAP bounced back and forth, the current price sits at the upper side of the channel. Price touch on the lower end of the channel is a good entry to position for the stock. Where the gap would close is another pullback entry point.Your entry range is between $16.00 and $17.25. The lower on this range, the better is your accumulation. There are times on situation like this that the stock price will not respect the channel and it will create a Supernova effect that pullback sometimes never happens and it is good to be buying where the close of the previous day's high falls. Since we assume that Gap Up 4 would follow the pattern of Gap Up 2, then we put our bait on the lower side of the channel. That is in every pullback.
Fig. 6 "
SNAP Gap Up 4 similar to Gap Up 2"
The chart above is an updated version 28 Bars after the New 78 Day High on Jul 25, 2019 of SNAP. As per history from its previous move on its 2nd Gap Up, it run 41 bars before closing the gap. In this case, the gap is around $15.00 of which it started to be tested last Aug. 27, 2019. At this point higher lows aligned with the lower part of the regression channel which is also the lower part of our Darvas Box. The big possibility is that this $15.00 will be retested if it would create a support. Previously the date set for the closure of the Gap was Oct. 1, 2019. This chart is upgraded to Sep. 20, 2019. The breakout date for the Darvas box at $17.60 could still occur after 56 bars, that would be around Oct. 11, 2019.
A comparison to SPPI run
There is one stock that I would like to mention that somehow made also a similar move as with SNAP. Take a look on SPPI. I am not going to elaborate the move. But just observe how the chart progressed after it had made a New 78 Day High with a Gap Up. We made a a target of $16.00 from $8.88 and the stock soared closed to $21.00, making around 145% return.
Calculating the Target Price:
TARGET
PRICE CALCULATION:
TP = ((PH - VL) * 3) + BC
Where:
TP =
Target Price
PH =
Previous High
VL =
VCP (Volatility Contraction Pattern) Low
BC =
Breakout Close
This formula was created out of the many scenarios I have seen that happens to stocks reaching New 78 Days High. This helps us a lot to give us a sense of direction what price are we looking at to make a good return of the investment.
VL value is taken from the open of the red candle against the red volume on the left side of the breakout volume that either stands as next highest against breakout volume.
If we substitute the values from the chart into the formula we should be able to come up with this calculation:
TP = ((PH - VL) * 3) + BC
TP = ((16.13 - 12.35)*3)+17.60
TP = 28.94
In this instance we are looking at the price of SNAP to reach to $29.00. Almost the same price to the historical high it made 2 days after its debut.
See the chart to see where are those price points taken.
Calculating the Stop Loss:
If our Target Price is $28.94 and our entry range is between $16.00 to $17.25. Assuming you enter at $16.50, you can set your stop accordingly at 5% below your entry point.
To Calculate your Stop Loss follow this formula:
Stop Loss = Entry Price - [((Target Price - Entry Price) * 5% ) ]
Stop Loss = 16.50 - [((28.94 - 16.50) * 0.05)]
Stop Loss = 15.88 or around $15.80 or $15.75
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N78 Day High - Test on Stop Loss - CPRX
Double Day N78 Day High - FSI
Interesting Article from Market Realist concerning SNAP's turn-around.