Will SoFi Technologies (SOFI) benefit from the debt limit raise?
$SoFi Technologies Inc.(SOFI)$ has seen its rally over the last week, as the market await the news of a debt limit raise vote approval by congress and senate.
Now we have seen debt limit approval coming to an end. SoFi Technologies stands to benefit from it.
From what I foresee US student loan payments will resume in August based on debt limit compromise.
But we could be looking at a earlier period, this is why as a large student loan servicer, student loan originations could quadruple from current levels.
SOFI Advantage of lengthy growth runway
As we can see from the past events since March 2023, financial institutions to ensure the safety of their money depositors are in focus.
This is even more important as we need to remember that the bank run crisis is only subdued, I do not see that it is completely resolved.
SOFI has this advantage of a lengthy growth runway as they demonstrates top-line improvement and can ensure the safety of its big-money depositors.
Resumption of student loan payments
If you follow SOFI stock movement, we can see that SOFI has added 7% on resumption of student loan payments.
This is only partly due to the benefit SOFI stand to gain from U.S. debt ceiling compromise.
SOFI Option Contract Trading
On 31 May (Wednesday) SoFi Technologies (NASDAQ:SOFI) stock surged 15.1% as the debt ceiling deal included a plan to resume student loan payments in August, a move which significantly benefits SoFi.
There are 856,135 SoFi option contracts traded on Wednesday. Call options account for 79% of overall option trades. Particularly high volume was seen for the $7 strike call option expiring Jun 2, with 105,202 contracts trading.
This is the latest SOFI Open Interest
SOFI Open Interest: The option open interest in SOFI climbed 4.5% to 1.8 million contracts. The current open interest is above its 52-week average of 1.7 million contracts. Currently, the OI percentile rank is 74.3%. So, SOFI had a higher OI 25.7% of the days in the last year. This indicates there is a lot more demand to trade and carry option positions in SOFI than normal. The most notable increase was in the 21-Jul-23 expiration which added +27,463 contracts.
SOFI Call Open Interest: The open interest in SOFI call options increased by 2.5% to 1.2 million contracts. Furthermore, call open interest is up 14.8% in the last 5 days. Compared to its 52-week average of 1.1 million contracts, the current call open interest for SOFI is stronger than usual.
SOFI Put Open Interest: The open interest in SOFI put options has grown by 8.6% to 629,766 contracts. Furthermore, put open interest has risen 19.9% in the last 5 days. Compared to its 52-week average of 624,429 contracts, the current put open interest for SOFI is higher than usual.
SOFI Put/Call Ratio (Open Interest): In the last 5 days, the put/call ratio for SOFI increased by 4.5% to 0.5. The put call ratio is below the 52-week average of 0.6.
SOFI Price Forecast (12 months period)
I believe SOFI is reaching the analyst predicted price forecast very soon, but I think investors are more interested to see if they can actually clear $9.00 over the next few weeks.
Looking at what I have shared above, it will be worth noting how fast can the student repayment loans start coming back, the earlier the better.
There are quite a large amount of options trading, this could mean some volatility in price action for SOFI.
I can expect SOFI to either have a big Gap Up when market open on Monday(05 Jun), or maybe in mid week.
SOFI Technical Analysis - Moving Averages
Looking at the BUY signal given based on moving averages, it looks like SOFI will be able to benefit from the debt limit raise, as soon as it is in legislation.
I believe SOFI customers will start coming back for the loan program.
SoFi Technologies’s (SOFI) 10-Day exponential moving average is 5.86, while SoFi Technologies’s (SOFI) share price is $7.03, making it a Buy.
SoFi Technologies’s (SOFI) 100-Day exponential moving average is 5.69, while SoFi Technologies’s (SOFI) share price is $7.03, making it a Buy.
SoFi Technologies’s (SOFI) stock price is $7.03 and SoFi Technologies’s (SOFI) 50-day simple moving average is 5.62, creating a Buy signal.
SoFi Technologies’s (SOFI) stock price is $7.03 and SoFi Technologies’s (SOFI) 100-day simple moving average is 5.92, creating a Buy signal.
SoFi Technologies’s (SOFI) stock price is $7.03 and SoFi Technologies’s (SOFI) 200-day simple moving average is 5.60, creating a Buy signal.
SOFI Hedge Funds Holdings
We can see that hedge funds has decreased their holdings by 9.4M Shares last quarter, I believe this is inline with the concerns of SOFI Student Loans, there is no sight of when it can be restarted, or when student loan payment will be coming back.
This is because of the uncertainty of the debt ceiling raise or not talk.
Now we have a clearer direction of where the debt limit raise is heading, I foresee hedge funds could be coming back to load on this fintech stock, SOFI.
SOFI Insider Transaction
In the last 3 months, the corporate insiders have bought shares worth $732.6K.
This represent the confidence and faith they have in the company as they have a length runway, which will put them in a good stead once the uncertainty around debt ceiling is cleared.
I would expect more insider transactions to show buying of shares of SOFI.
SOFI Investors Sentiment and Holdings
SOFI investors have very positive sentiment on this stock, they have been increasing their portfolio of SOFI shares over the last 7 days and last 30 days.
I believe this trend will continue as most investors would be buying to take advantage of the low stock price of SOFI.
SOFI After Hours Trading
If we look at the 02 June 23 After Hours trading, SOFI seem to be trading sideway throughout the whole session.
I cannot see any investors high interest in this stock, hence I would think Monday (05 June) premarket would be crucial to determine if investors cheer on the debt limit raise to benefit SOFI.
If that happen, we should see SOFI share price trending upwards.
SOFI Trading View Bull/Bear Strength
As seen in after hours trading, it is Bear strength from Bull/Bear power, we need to see a change to Bull strength in early hours of Monday (05 June) premarket before we can see if investors are interested and will have more faith in SOFI.
There is short relief though that daily Bull/Bear power show that 31may-02june, we are seeing Bull strength, I would expect that to continue on Monday (05 June).
Hence, SOFI stock price should be trending upwards.
I have no holdings in SOFI but I would be monitoring it closely as I can see SOFI benefiting from the debt limit raise.
SOFI is a potential fintech stock with a good runway, as fintech need to be able to have a long runway to sustain any uncertainity.
But do practice cautious and do your own due diligence to check your own trading plan. What I share could be from my own perspective.
I welcome any sharing or comments on what is your thought.
Appreciate if you could share your thoughts in the comment section whether you would consider SOFI as a potential fintech stock?
Do like, share and comment on this article if you find this trading thought useful.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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