To The Moon

Hi everyone. Today I’ll be looking at a software company that Cathie Wood divested:

Snowflake Inc. (NYSE: SNOW)

On the daily chart, we can see that SNOW has been in a downtrend since IPO, with lower highs and lower lows forming.

That being said, SNOW is trading in what appears to be a short-term expansion pattern from lows at 110.27, with higher highs and higher lows being put in. It is currently back at the 3-year support trendline while retesting a prior strong support level at 135.26. The daily chart is in the midst of forming a potential bullish divergence, which suggests an imminent reversal to the upside.

We can also see SNOW trading in a shorter-term falling wedge pattern (in purple) into support, with volume picking up on the latest rejection down into support.

On the 4h chart, we can see the wedge pattern more closely. Bullish divergence is also forming on the 4h chart, although I am slightly cautious as the last bullish divergence took more than 2 months to play out.

Should the divergence play out here, I am expecting a move back towards the key 168.68 level that has served as both strong support and resistance on different occasions over the past 3 years. In the longer term, I am expecting a move back towards 250.58 to fill the remaining section of the Feb’22 gap. Again, this is contingent on SNOW holding its 3-year trendline.

In the event that we break down from this 3-year trendline, then the past 3 years has merely been bearish consolidation to put in a lower high before continuation of the downtrend. A breakdown should see the 126.07-126.67 gap being filled, with a move lower leading to a potential retest of the strong support at 120.58.

However, the risk-to-reward is still better for bulls than bears at current levels. Software stocks across the board have taken a major hit over the past few weeks, and this sector-wide valuation correction should be seen as a major dip buy opportunity rather than a time to close out positions.

In light of SNOW’s favourable technical setup, I am initiating coverage on it with a BUY sentiment.

Sentiment: BUY (New)

Summary (with Price Targets - NFA):

• Short-term expansion pattern with higher highs and higher lows, and is currently retesting its 3-year support trendline

• If SNOW holds trendline support and the 135.26 level, it should see a short-term move towards key resistance at 168.68, and a longer-term move towards 250.58 to fill the Feb’22 gap

• If SNOW breaks down from trendline support, it should fill the 126.07-126.67 gap, with further downside potentially taking the stock back towards key support at 120.58

All right, that’s all for this newsletter. Till next time!

$Snowflake(SNOW)$ $Datadog(DDOG)$ $MongoDB Inc.(MDB)$ $Adobe(ADBE)$ $Twilio(TWLO)$

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