The key to picking stocks is knowing what works, Jim Cramer told viewers Thursday night on Mad Money. In his experience, what works are turnaround stories such as Snap Inc. (SNAP) , the parent of Snapchat app, that had been written off and left for dead last year, before nearly tripling from its lows.
Cramer admitted being late to the Snap party, but the shares still trade for just 21 times its out-year estimates.
Let's check the charts of SNAP to see if there is still more upside.
In the daily bar chart of SNAP, below, we can see a constructive picture. Prices have trended higher the past year. SNAP is above the rising 50-day moving average line and the rising 200-day moving average line. The 200-day line was successfully tested in October, November and December.
The On-Balance-Volume (OBV) line has been rising all year and the new high made this January helps to confirm the price gains. A rising OBV line tells us that buyers of the stock have been more aggressive with heavier volume being traded on days when the stock closes higher.
The Moving Average Convergence Divergence (MACD) oscillator is in a strong move higher in positive territory -- doesn't get more bullish than this.
In the weekly bar chart of SNAP, below, we can see a large bottom formation. Trading volume is heavier on the "right side" of the pattern, which tells us that more traders and investors have been attracted to the stock.
The easier to "read" On-Balance-Volume (OBV) line shows a rise from late 2018 or from the bottom of the pattern. The rising OBV is positive. Prices are above the rising 40-week moving average line. The MACD oscillator just crossed to the upside for a new outright go long signal.
In this first Point and Figure chart of SNAP, below, we used daily price data to generate the X's and O's. A relatively nearby price target of $22 is shown.
In this second Point and Figure chart of SNAP, below, we used weekly close-only data to construct the chart. Here a potential price target of $29 is indicated.
Bottom-line strategy: SNAP has an impressive base formation on the weekly chart. Our Point and Figure target is $29. Approach SNAP from the long side. Prices may or may not dip toward $18 but look to be a buyer at current levels or on a dip. Risk below $17.