To The Moon

$Snowflake(SNOW)$ delivered solid Q3 earnings, reinforcing its growth trajectory as a leader in the AI-powered Data Cloud space. Despite strong fundamentals, the stock has encountered resistance at $175 in the three trading days following its earnings announcement. This setup presents an intriguing opportunity for a bullish swing trade, provided certain conditions are met.

Snowflake’s Q3 results underline its ability to maintain impressive growth metrics in a competitive market:

• Product Revenue: $900.3 million, up 29% year-over-year, reflecting strong demand for its enterprise data solutions.

• Net Revenue Retention Rate: 127%, demonstrating its ability to expand within its existing customer base.

• Large Customer Growth: 542 customers with over $1 million in trailing 12-month revenue, a 25% year-over-year increase.

• Forbes Global 2000 Customers: 754, up 8%, signaling continued traction among the world’s largest enterprises.

• Remaining Performance Obligations (RPO): $5.7 billion, a 55% year-over-year growth rate that accelerates future revenue visibility.

CEO Sridhar Ramaswamy highlighted Snowflake’s competitive edge in product cohesion and cost-effectiveness, which drives customer expansion and loyalty. With these results, Snowflake’s long-term potential remains robust.

My Post-Earnings Observations

SNOW Daily Chart

In the three trading days since earnings, Snowflake’s stock behavior has been telling:

1. Resistance at $175: The stock has repeatedly tested the $175 level but has been rejected each time, trading lower afterward. This suggests a strong supply zone at that price.

2. Declining Volume: Daily trading volume has been decreasing during the 3 trading days post earnings, a sign of waning momentum. However, this could also signal consolidation, a precursor to a breakout.

For a successful bullish trade, I’m looking for Snowflake to break and hold above the $175 resistance level with significant trading volume. If this occurs, I believe the stock has the potential to quickly test the $187 level, a fib retracement upside target given the current price action and momentum.

My Trade Plan

SNOW Weekly Chart with Fib Retracement Levels

Based on the current setup, I’m preparing for a bullish swing trade using call options:

1. Trigger for Entry: A breakout above $175 with strong volume. This confirms the resistance level has turned into support and signals a potential upward move.

2. Target Price: $187. This level aligns with historical price action and represents a reasonable upside in the short term.

3. Stop-Loss: Below $173. If the breakout fails and the price drops back below $175, I’ll exit to manage risk.

I like the idea of using options here because they offer leverage and defined risk. I’d opt for calls with a few weeks until expiration to capture the potential move while allowing for some time flexibility. This trade idea is doable for shares as well, with about 6-7% upside.

The Bigger Picture

Snowflake’s strong financial performance and growth metrics reaffirm its position as a leader in enterprise data solutions, particularly within the AI-driven economy. While the stock has faced resistance post-earnings, its long-term fundamentals remain intact, and its RPO growth points to sustained demand.

This trade is not about long-term investment but rather taking advantage of a potential breakout and momentum in the coming days. Patience is key, as waiting for the breakout confirmation will increase the odds of a successful swing trade.

What’s Your Take on SNOW?

Are you also eyeing a breakout, or do you see this resistance as a reason to stay cautious?

Let’s discuss strategies for trading Snowflake’s next move! [Smart]

@MillionaireTiger @Tiger_comments @Daily_Discussion @CaptainTiger @TigerSG

Disclaimer: This is a general analysis and not financial advice. Always conduct your own research before making any investment decisions.