Snap stock is on the move after the company said it would cut up to 20% of its staff. Here’s key support and resistance.
Snap (SNAP) – Get Snap Inc. Class A Report has been a terrible performer this year, down 77% in 2022 and having suffered a peak-to-trough decline of 87%. Coming into Wednesday, it looked set for more losses.
Snap said it would lay off as much as 20% of its staff, while its chief business officer, Jeremi Gorman, and its vice president of ad sales, Peter Naylor, would head to Netflix (NFLX) – Get Netflix Inc. Report.
The company is looking to cut costs in the wake of a volatile macro environment and difficult ad situation.
On the news the shares fell 7.5% in last night’s after-hours trading session and fell more than 13% in Wednesday’s premarket. Had the stock opened lower by that much, it would’ve been trading at new 52-week lows.
Instead, buyers stepped in, and shares of Snap opened higher by about 12% on the day and rallied as much as 16%. While the shares are up about 9% at last check, it’s an improvement from what we saw before the open.
Buy or Sell Snap Stock on the News?
Daily chart of Snap stock.
Chart courtesy of TrendSpider.com
As one Real Money contributor put it, Snap stock is rallying — for now. The oversold bounce on what was considered bad news just a couple hours ago is a welcome development.
But for a stock that’s down over 75% from its high, we need to exercise some caution.
So far, Snap stock is struggling for upside traction and continues to struggle with its 50-day and 10-week moving averages, which have been active resistance.
If Snap stock can push higher and clear today’s high, the $12 to $12.50 zone — and thus these two moving averages — will be put to the test. For the bulls to have any sort of sustainable upside momentum, the stock must clear these two measures.
On the downside, $10 has proved to be key. Traders who are long this name may consider using this week’s low as their stop-loss, down at $9.85.
A break of $10 and this week’s low opens Snap stock to a retest of the 2022 low at $9.34. And real problems arise if this level is breached and the stock does not reclaim it.
Specifically, it could open the door down to the 2020 low at $7.89, along with the 161.8% downside extension of the current range, at $7.21.
So what’s the bottom line? The bulls need to see Snap stock hold up over $9.85 to $10 on the downside and take out the $12 to $12.50 area on the upside.
