Chart of the week: a social media stock to buy?
After drifting back from its February peak, there’s a chance of a new record high here.
10th May 2021 15:54
by John Burford from interactive investor
After drifting back from its February peak, there’s a chance of a new record high here.
Snap these shares up?
Snap Inc (NYSE:SNAP) is one of the lesser social media giants, but I believe it is well worth a good look now that first-quarter results are now out and show excellent revenue and user growth.
But of course, the Sword of Damocles hovering over all social media is the threat of regulatory clampdowns, particularly in the US and EU. And the perennial competitor for Snapchat is the market leader Facebook (NASDAQ:FB), which seems to never hold back on copying the most popular features of any competitor.
From the exuberant all-time high set in February at the $74 mark, the shares have been under considerable consolidation:
Past performance is not a guide to future performance.
The surge to the 22 February record high at $74 is my wave 3 and the a-b-c correction since then is a textbook wave 4 pattern. So long as that low at $47 holds, my outlook is for the shares to continue their rally to above the old high.
Here is a close-up of recent action:
Past performance is not a guide to future performance.
I have a textbook set-up for a strong wave 3 of 5 up that should take the shares to well above $74.
But - and there is always a 'but' – if tech shares experience a general selling phase as they extend into the outer reaches of valuations, then a hard break of the major support at $48 would send me scurrying back to the drawing board.
John Burford is the author of the definitive text on his trading method, Tramline Trading. He is also a freelance contributor and not a direct employee of interactive investor.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
Disclosure
We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.
Please note that our article on this investment should not be considered to be a regular publication.
Details of all recommendations issued by ii during the previous 12-month period can be found here.
ii adheres to a strict code of conduct. Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.
In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.