Bullish Signal Says More Record Highs in Store for SNAP

The equity is already up over 87% year-over-year

Digital Content Manager
Oct 6, 2020 at 2:23 PM
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The shares of Snap Inc (NYSE:SNAP) are down 1.1% to trade at $27.24 at last check, after hitting an all-time-high of $27.78 earlier today. And while the social media giant is already enjoying an impressive 87.4% lead year-over-year -- with support from the 20-day moving average over the last several weeks -- a historic bullish signal that is now flashing on the charts may indicate even more upside for SNAP in the near future.

More specifically, the stock's recent peak comes amid historically low implied volatility (IV), which has been a bullish combination for the equity in the past. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been two other times in the past five years when the stock was trading within 2% of a 52-week high, while its Schaeffer's Volatility Index (SVI) sat in the 20th percentile of its annual range or lower -- as is the case with the Snap stock's current SVI of 49.2%, which sits just above the 13th percentile of its 12-month range.

Data shows the stock was higher a month later, averaging a return of 15.7% for that time period. From its current perch, a move of similar magnitude would put SNAP just above the $31 mark, at yet another record peak.

SNAP 20 Day

While the majority of analysts covering SNAP are bullish, there is still room for upgrades and price-target hikes going forward, which could propel the stock even higher. Of the 27 in coverage, 19 call it a "strong buy," while the remaining eight say "hold" or worse. Plus, the 12-month consensus price target of $20.79 is an unimpressive 2.7% discount to its current perch. 

That optimism is reflected in the options pits, where calls are popular. The security sports a 50-day call/put volume ratio of 4.56 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) that sits in the 76th percentile of its annual range. This suggests a healthier-than-usual appetite for bullish bets of late.

What's more, the equity's Schaeffer's Volatility Scorecard (SVS) ranks at 93 out of 100, implying that SNAP has tended to exceed volatility expectations in the past year -- a boon for option buyers. 


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