Trading Secrets 01-12-2023 00:03 23 Views

SNAP’s Stock Price Snaps Out Above Bollinger Band — Could This Be a Profitable Opportunity?

Snap Inc.'s stock (SNAP) price exceeded its upper Bollinger Band. But what does this mean for the stock's price move?

To start, a move above a Bollinger Band isn't necessarily a signal to buy. It's more of an indication of strength, and that strength could extend into something bigger and stronger.

In the daily chart of SNAP below, price "walked the band" from October, gapped up in early November, pulled back a bit, and then gapped up again. There's a chance that SNAP's price can "walk the band" with several touches if the uptrend is strong. But will the trend be strong, or will SNAP's strong price move fizzle out?

CHART 1: DAILY CHART OF SNAP, INC. Snap's stock price exceeded its upper Bollinger Band, which is an indication of strength. But is the strength enough to push this stock higher?Chart source: StockCharts.com. For educational purposes.

Generally, when looking at Bollinger Bands, the 20-day SMA can sometimes act as a support level. But on the daily chart, SNAP hasn't pulled back to that level since late October, the early stage of its uptrend. So, when you see a move such as the one in SNAP, it doesn't hurt to add a momentum indicator such as the relative strength index (RSI) to your chart.

The RSI is at 85.77, which is an indication the stock is overbought. There's a chance the stock could remain overbought for an extended period of time.

The stock has a few things going for it.

It hit a new 52-week high. It gapped higher. Volume spiked.

If this momentum continues, it could take the stock higher, the stock could continue moving up along the upper Bollinger Band, and it could remain in an overbought RSI territory for an extended period of time. But how much higher can SNAP go? For that, you'll have to look at a longer-term chart.

Looking at a 5-year weekly chart, you can see that SNAP's ride to its all-time high is a long way away (see chart below).  The stock has been basing for over a year. There needs to be much stronger upside momentum to push the stock higher. Breakouts from basing patterns are often good trading candidates. If SNAP does break above this pattern on strong momentum, it would be a good long position to add to your portfolio. For this reason, SNAP is worth watching.

CHART 2: WEEKLY CHART OF SNAP. The stock is trading close to its low and has been trading sideways for over a year. A strong move higher could see this stock break out to the upside and make its way towards its all-time high.Chart source: StockCharts.com. For educational purposes.

The Bottom Line

Add SNAP to your ChartLists and set an alert for price crossing above $15. If it does that, monitor the stock, and if an uptrend (series of higher highs and higher lows) is established, you may want to jump on board.

How To Create An Alert in SharpCharts

From Alerts, select New to create a new alert.Enter the stock symbol.Select the Trigger.Select how you wish to be notified.Save alert.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

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