Snap Inc. (SNAP) shares have gapped down in premarket action here on Friday by around 25% after the social media company said it expects zero revenue growth for the current quarter. Let's check the condition of Snap's charts and indicators.
In this daily bar chart of SNAP, below, we used a log scale to display the price movement. Prices have fallen especially hard the past 12 months. SNAP shares have tried to stabilize around the $10 area but that tentative buying interest (support) will be broken on the opening of trading Friday. The slopes of the 50-day and 200-day moving averages are negative. The daily On-Balance-Volume (OBV) declined into late July and then drifted higher into late October. This suggests a shift toward more aggressive buying, which could be short covering but also could have been outright buying. If buying was seen in the past couple months it will mean that traders will be voting with their feet today. The 12-day price momentum study suggests that the pace of the decline has slowed, but that is not going to help the price action today.
In this weekly Japanese candlestick chart of SNAP, below, we see a negative picture. Prices are in a longer-term decline and trade well below the bearish 40-week moving average line. The weekly candles all look like spinning tops but that has not produced a bottom reversal. The OBV line has moved sideways since the middle of July after a steep decline. The Moving Average Convergence Divergence (MACD) oscillator is bearish.
In this daily Point and Figure chart of SNAP, below, we can see a downside price target in the $3 area. Ouch.
Bottom line strategy: SNAP is not a falling knife -- it is a plunging knife and traders should not consider buying it at any level.
