Here’s how I’m trading Snap ($SNAP) tomorrow. (July 21, 2020)
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I want to look at Snap ( NYSE: SNAP ),( Snapchat ) here. The company reported earnings after hours. If we just look at where the stock was trading before the close it was just kind of consolidating here, just a little under $25.00. But then when you look and see how the stock traded at one point it pulled clear back to the 50-day moving average.
That kind of reminds me a little bit of Netflix ( NASDAQ: NFLX ) when the stock traded after hours on their earnings call down to 450.00. You can’t see it here but after hours the stock traded clear down to the 50-day moving average and then rebounded; you could have almost said, let me buy it, 450.02 and you would have got the perfect fill.
Snapchat ( NYSE: SNAP ) kind of gave you the same thing, that’s then but we are talking about tomorrow. This is the deal: The company’s revenue growth is slowing a little bit. Their active users were up 17 percent, I’m not a real fundamental guy on this stuff; their active users are up 17 percent. But with respect to the revenue, it’s all adds, they were saying that adds are starting to come back as things kind of open up. I don’t know about any of that.
I will say this, everything that I just told you about the company, their numbers and all that, that’s all I know. I am sure that Snap ( NYSE: SNAP ) has a homepage but I can assure you, I have never been there. I am not a “Snapchatter”, I am really not a Twitter ( NYSE: TWTR ) guy, I don have almost 60 thousand followers but it’s mostly marketing and every once in a while a stupid thing that I tweet and then immediately regret it.
I am not a Facebook ( NASDAQ: FB ) guy. I am not an “Instaplant” guy. I don’t know anything about this stuff; it’s not my deal. You are going to have to find somebody else to who is going to talk about that, I will just talk about the chart. By the way, I am not a TikTok guy either unless it’s a watch but I don’t even get a tick tock thing I’ve got a phone, it’s quiet.
The thing is, if we look at this line here ( NYSE: SNAP ), which I drew a while ago, the stock has been squeezing. And so, okay Dan 2 minutes and 30 in, what the heck am I supposed to do? This is what you are supposed to do, in my view. Right now the stock is trading in this range, this was the intraday high up here. We could even say that this is the low, so this is the range, 24.90.
If the stock breaks out tomorrow, and it might because the market was weak today; but look, earnings from what I saw are still pretty good the market was just looking for more; that’s weird how that happens. If the stock breaks out above this line tomorrow, I think you want to be a buyer. The level that I would look at, 25.74, that’s today’s intraday high. So I would look to be a buyer, literally at 25.75.
If the stock breaks out above today’s intraday high I would buy the stock and I would start looking for $30.00; that would be my trade. Now, you could say, oh yeah, but I will get an early start on it and buy it lower. Well, you could do that if you knew that the stock was ultimately going to break out but you don’t. You might think you do, but you don’t.
And so, to be buying a stock early, before it breaks out, you are assuming that it is going to break out. And this is what I would tell you, you are wrong in assuming that. You are taking extra risk by buying a stock before a breakout. That’s fine, you are taking extra risk but ask yourself this, if the stock does break out how much percentage advantage or dollar advantage am I getting by buying now, buying early, versus just waiting for the stock to break out?
That’s the question you have got to ask yourself. Sometimes the answer is, I am going to go ahead and buy now, that’s okay. But that is the question you have to ask yourself. You have got to know, you have to make a decision, do I wait for the sure thing? And I am not talking about whether the breakout is going to work or not, that’s a different topic. You can wait for the sure thing when the stock does actually break out and you know it has broken through the point of least resistance there and then buy the stock. Or buy it early and take the risk that the stock doesn’t break out.
Those are numbers; there are numbers you can assign to that. You just need to understand that, that is what you are doing. So in this case, like I said, the stock breaks out to a new early high here above 25.74. That’s when I would look to buy the stock; and if you look at 26.74 as the high on this day, on July 9th, that’s when you would add to the position. That is kind of aggressive but that is what you would be doing.
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