I had an exciting experience with SNOW and I can’t wait to tell you about it.

SNOW has been under almost non-stop accumulation. It’s a cloud software stock, one of those that should have been taken to the woodshed and shot like most others, but it held up! 

While other tech-related stocks were down 50-60%, SNOW was only down 20%. As a trader, it is my job to get long strong stocks! Another check in my favor was that I thought the market would go higher over the next 2 weeks. Thus any dips would be gifts and buying opportunities!!

Here’s How the Call Played out:

Fundamentals

Snowflake Inc. (SNOW) provides a cloud-based data platform in the United States and internationally. The company’s platform offers Data Cloud, an ecosystem that enables customers to consolidate data into a single source of truth to drive meaningful business insights, build data-driven applications, and share data. 

SNOW is a cloud software stock, one of those that should have been taken to the woodshed and shot, but, it held up. For example, SEA LTD (SE) went from $365 to $220, Upstart Holdings (UPST) went from $400 to $132. SNOW is a similar company, but the chart is relatively strong compared to its peers. While other stocks were down over 60%, SNOW was only down 20%. As a trader, it is my job to get long strong stocks! While stocks like SE and UPST keep finding new lows, SNOW has been bought and has been consolidating. 

Institutions love the stock and their growth estimates going forward are great! The company is looking to be a market leader in the sector, and the market is really buying into the story. Due to the institutional support, I expected SNOW to receive support and buying from these funds on big dips as it has continued to do! 

Technicals

Here was my read from Monday:

From a technical outlook, I expect to see buyers stepping in near the $325 level similar to early December where they made the prior pivot low. Snow dropped from $400 to the low $ 300’s, but we’ve seen other stocks have a much, much rougher time! 

If they can, there is a lot of room to the upside for a run back towards the 100 and 200 hourly moving averages, with the pivot high near $375 as a possible distant target for bulls looking to hold on for the ride.

I do expect things to be volatile, so I want to give this trade ample room to trade. I plan to stop out if this breaks the “panic low” we saw on Thursday last week, around $310.

On the upside, I think SNOW could rally back into the $350s or higher before the end of the year. I don’t want to chase this trade right out of the gate on Monday, I do think we will get a dip into the mid-$320s by Tuesday and that’s where I want to get started.

My Trade Plan:

• Entry Price: Mid $ 320’s if possible on Tuesday

• Target Price: $350 near the 100/200 hourly SMA

• Stop Price: $310 under pivot lows from last Thursday

   

My Trade:

• Higher-risk “spicy” idea: SNOW Dec 31, 2021, 350 Call near $6.50

• More conservative idea: SNOW Dec 31 2021 320 Call near $20

• Another lower-risk option on this idea that I like is to sell SNOW Dec 31 2021 $310/300 put credit spread around $2.60. I plan to set this trade up in Total Alpha this week.

   

Here’s How the Trade Played Out:

Target HIT!

Now that the bulls have successfully pushed the price back into the 200 hourly moving average, the next place they could run would be the pivot high near $375.  

Now, I know this is a distant target for bulls but it’s not unlikely, especially if more buyers pile in when the 200 hourly moving average is broken to the upside.

How did SNOW work for you?

The higher-risk “spicy” idea SNOW Dec 31, 2021, 350 Call near $6.50 – traded at $15.60!

Bottom Line

Tech stocks have been taken to the woodshed, a lot of them down 50-60% or more. SNOW was an exception, down only 20%. While other stocks were making lower lows, SNOW was getting bought up on every dip and has been consolidating. 

On Monday, I believed the market would go higher over the next two weeks, and thus this was a buying opportunity, a gift from the market. 

SNOW is loved by institutions who are believing in the story and significant growth forecast. This pent-up demand has meant the stock has been bought on dips. I expected this to continue and that if the market turned higher, which it did, SNOW would benefit. This trade is going into the Bullseye Hall of Fame!