SNOW (Long) - Beautiful Technicals, Don't look at Fundamentals
Fundamentals
Technicals
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- Really not here to admire the pristine fundamentals - the stock is severely overpriced with a price-to-sales over 20
- However, having been at this for a while, for a 6-month horizon, the technicals, price and the momentum are the things to focus on
- Regardless,
SNOW
is an outstanding company with a very bright future. However, its price might fluctuate wildly over the coming years until its sales catch up with the valuation
- For now, the technicals are the key...
Technicals
- The longer a firm has been forming a bottom, the more excited I tend to get about a breakout
- The price of SNOW has been oscillating around for a while, forming a basing pattern (pick any of the three names on the screen) and accumulating share demand and momentum
- If everything goes well, the price breaks out cleanly over the resistance (black line)
- Looking at the stochastics, momentum is strong and volume has been on our side for the duration of the most recent up leg - shown by the Chaikin Money Flow indicator.
- However, considering my slight doubts about the overall market, I would shorten the horizon on this trade to 2-3 months - to hedge the best in case the market calls the investors' "soft-landing" bluff
Trade
- I see two potential ways of playing this trade: (i) enter where the price touched the red-coloured line, catching the pullback and frontrunning the breakout (if you have a strong conviction) or (ii) wait for the actual breakout - best-case scenario is a long, fat green candle which sustains the highs towards the close and does so on volume
- Given the first choice, stop loss just below the red line or the 19-day EMA. With the second option, the black line is the obvious stop
- Failed breakout would be an obvious no-no for me and I would abort the trade and wait how the price action develops
- Also closely watch the
QQQ
, Snowflake likes to follow it and I have some worries about the sustainability of the tech rally
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If you like my content, Please leave a like, comment or a donation, it motivates me to keep producing ideas, thank you :)