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Social Media, AR Leader Snap Trying To Augment Recent Breakout

Social media and augmented reality (AR) leader Snap (SNAP) gapped up nearly 24% on July 23 after reporting earnings. Now SNAP stock is looking to hold on to and augment those gains as it tests its current buy zone. The stock has also formed a new flat base to offer a different entry.




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The Santa Monica, Calif.-based company has earned a spot on IBD Leaderboard as well the IBD 50 list of top growth stocks.

The Snapchat parent was featured on Aug. 10 while trading at the top of its buy range, but has now pulled back to test support at its 50-day moving average.


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Snap Targets Businesses With Snapchat Trends

Snap recently introduced Snapchat Trends. Using case studies, Snapchat Trends helps businesses find topics that perform well on the platform to enhance audience engagement.

To help businesses target Snapchat’s audience of 293 million daily active users, the social media and AR innovator outlined five ways businesses can apply Snapchat Trends. Businesses can use the platform to optimize their market research and creative copywriting efforts. They can also use Snapchat to drive engagement and market research through user profiles and personas.

Snap labels itself a camera company, with three brands within its lineup: Snapchat, Spectacles and Bitmoji.

Spectacles are sunglasses that let users see their world in a new light, employing augmented reality (AR) to create immersive experiences. In July, Snap bought Vertebrae, expanding its push into the AR arena. With Vertebrae, brands can create 3D versions of their goods.

With Bitmoji you can create a digital you in the form of a “living cartoon.” Through Bitmoji users can express who they are and what they’re feeling at the moment.

Money Managers Show Demand For Snap Stock

While Snap stock did not make the latest list of new buys by the best funds, there are clear signs of real institutional demand for the social media and AR technology leader.

Over the last four quarters, the number of funds with a position in Snap stock has jumped from 924 to 1,497.

In Stock Checkup, the Snapchat parent earns a 93 Composite Rating, meaning it’s outpacing 93% of all stocks in terms of key stock-picking traits. Snap is in the internet content industry group, which ranks No. 12 among the 197 groups IBD tracks. Facebook (FB) and Google parent Alphabet (GOOGL) lead the industry.

While Snap has struggled to establish a track record of profitability, revenue has been strong. Over the last eight quarters, sales growth has ranged from 17% to last quarter’s 116% spike.

Snap Stock Tests Buy Point And 50-Day Line

After the big gap-up in July, Snap held the bulk of those gains. It had traded essentially sideways until today, when it dropped sharply in morning trading.

But Snap stock is showing resilience as it comes off its lows to find support at its 50-day line. The relative strength line has been choppy. Look for the RS line to shore up and trend higher.

After breaking out in July and continuing to trade in that related buy zone, Snap has now formed a flat base on the weekly chart. That chart pattern shows an 80.95 buy point.

See if Snap stock is able to hold support at its 50-day and 10-week lines and break out in volume at least 40% above average.

Follow Matthew Galgani on Twitter at @IBD_MGalgani.

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