Signal Says Buy the Dip on This Software Stock

Speculating on SNOW's next move with options might be a prudent play

Digital Content Manager
Sep 30, 2021 at 8:17 AM
facebook twitter linkedin


The shares of Snowflake Inc (NYSE:SNOW) got a jolt at the end of August following an incredibly well-received quarterly earnings report. The rally lasted well into September, and it looked like the software stock was bucking the broader market's seasonality-driven performance. However since grazing $330 and annual highs on Sept. 17, SNOW has pivoted lower and now sports a 3.4% deficit this month. The silver lining is that this pullback has put the stock in contact with a historically bullish trendline that, if past is precedent, could signal upside in the coming month. 

SNOW just came within one standard deviation of its 40-day moving average after --per the chart below -- spending a considerable amount of time above the trendline. A study from Schaeffer's Senior Quantitative Analyst Rocky White reveals that similar pullbacks to the 40-day have occurred two other times in the past three years. One month after each signal, SNOW was higher, averaging a return of 16.3%. Short-term returns following these signals are impressive as well, with Snowflake stock averaging an 11.2% jump just one week after these pullbacks. A similar rise from its current perch would put SNOW at new annual highs by the end of October. 

snow chart spt 29

A good portion of analysts are still hesitant on the equity. Off the 25 in coverage, 15 consider it a "hold" or worse. Meanwhile, the 12-month consensus price target of $323.51 is a 9.5% premium to current levels, which could spark upgrades and/or price-target hikes, should the stock stage a bounce next month. 

An unwinding of pessimism among options traders could benefit SNOW, too. The security's Schaeffer's put/call open interest ratio (SOIR) of 1.02 stands higher than 82% of readings from the past 12 months. In other words, short-term options traders have rarely been more put-biased. 

Speaking of which, now looks like a opportune time to get in on Snowflake stock's next move with options. The stock's Schaeffer' volatility index (SVI) of 43% stands higher than only 9% of readings from the past 12 months. This implies options traders are pricing in relatively low volatility expectations at the moment. 

 

 

If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Stock Pick Report
 


 


 
Special Offers from Schaeffer's Trading Partners