Snapchat IPO: Good buy and worth investing in or total disaster?
Well its safe to say that Snapchat’s IPO got off to a volatile start. Moreover, it is still too early to really know if its a good idea to invest in this Snapchat IPO, but there are key things that can guide us a bit. First off, consider valuation. Many have mentioned the concerning market cap of the company. However, this is not a big issue at this point. One should also note that Twitter was reaching a similar valuation when it went public and managed to rise significantly in its first few weeks.
So, what traders will be looking for right now is an initial strong move upwards as we saw with TWTR and TWLO. Furthermore, the recent drop in stock price is normal at the beginning of many IPO’s and it by no means indicates that the stock won’t move up in the next month or two. Let’s now look at some important technical levels in the chart of SNAP below.
Snapchat IPO Technical Analysis
The technical analysis above can be used as a roadmap for the next couple of trading sessions. Tomorrow, March 9, will be an important day for the stock, as it should test the important resistance at $23.50. A breakout above that level will be very bullish, and we could reasonably expect the stock to retest its high at $29.44. In which case, SNAP should move much higher (+20% at least). This is because there would be a “blue sky” breakout (no resistance levels).
If a big spike were indeed to occur, the market cap would become quite large, but this is often ignored when a stock first goes public. Now, if the stock fails to breakout above $23.50, a retest of the key support level $20.64 would be likely. A loss of this vital support would be worrisome and could indicate that a bigger drop is nearby.
If this bearish event were to happen, I am inclined to think that Snapchat may end up like Nutanix (NTNX) quickly. With all this being said, I believe that we need more time before investing in Snapchat. However, short term trades may be warranted if the price action is good.