The American technology and camera company well known for its products Snapchat, Spectacles, Bitmoji, and Zenly, Snap Inc. (NYSE: SNAP) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Flag Pattern Breakout: As seen from the daily chart, the stock was in a strong uptrend after which it started consolidating. This is a classic flag pattern, which is a continuation pattern. The flag pattern is marked in purple color in the daily chart. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case. Currently, the stock has currently broken out of the flag pattern, which is a bullish sign.
Daily Chart – SNAP
#2 %K above %D: The stochastics show that the %K line is currently above the %D line in the weekly chart. This is a bullish sign.
[hana-code-insert name=’adsense-article’ /]#3 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating the overall bullishness of the stock.
#4 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
#5 Strong RSI: RSI is above 50 and moving up, indicating strength.
#6 IH&S Pattern: As you can see from the weekly chart, the stock has been forming an Inverted Head and Shoulders (IH&S) pattern.
This IH&S pattern is marked in the chart in pink color. An IH&S pattern is a strong bullish pattern and a breakout from it indicates that the stock may move higher in the short term.
Weekly Chart – SNAP
#7 MACD above Signal Line: In the weekly chart as well, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase half the intended quantity of shares of SNAP at the current price of $11.99. The rest of the shares can be purchased if the stock closes above the resistance level of $14.
TP: Our target prices are $18 and $22.
SL: To limit risk, place a stop loss at $10.40 (for entry near $11.99) and $11.40 (for entry near $14). Note that this stop loss is on a closing basis.
Our target potential upside is almost 28% to 83% in the next 3-6 months.
- Entry at $11.99: For a risk of $1.59, our target rewards are $6.01 and $10.01. This is an almost 1:4 and 1:6 risk-reward trade.
- Entry at $14: For a risk of $2.60, our target rewards are $4.00 and $8.00. This is an almost 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the flag pattern breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara
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