Snap Stock’s Rally Could Have Legs

Investing

Social media giant Snap (SNAP) has had a notable year, boasting a roughly 50% lead since the start of 2021. What’s more, the stock is fresh off a record high of $83.34, which it touched on Sept. 24, thanks in part to a mid-August bull gap. SNAP pulled back from this peak in October, but has found support at the $70 level, which is home to its pre-bull gap highs. Plus, the security just came back within striking distance of a trendline that could push SNAP even higher, if past is precedent.

Per a study from Schaeffer’s Senior Quantitative Analyst Rocky White, SNAP just came within one standard deviation of its 80-day moving average after a lengthy period above here. White’s data shows eight other signals occurring in the past three years, with SNAP enjoying higher one-month returns 57% of the time, and averaging a 7.6% pop in that time period. From its current perch at $75.52, a similar move would put the security just below its September peak at $81.26.

Sentiment surrounding SNAP is overwhelmingly bullish. Of the 23 analysts in coverage, all but four consider it a “buy” or better. Plus, SNAP sports a 50-day call/put volume ratio of 2.55 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 97% of readings in its annual range, implying options traders are picking up long calls at a quicker-than-usual clip.

Now could be a prudent time to join these bulls with options. The security’s Schaeffer’s Volatility Index (SVI) of 61% stands above just 23% of readings from the past 12 months. This means options traders have been pricing in relatively low volatility expectations at the moment. What’s more, the stock’s Schaeffer’s Volatility Index (SVI) ranks at 82 out of a possible 100, suggesting that SNAP has outperformed said volatility expectations over the past year.

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