How to Trade the Breakout in Snap Inc Stock

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Some investors on Wall Street might think that Snap Inc (NYSE: SNAP ) stock has run its course. But with short-sellers' interest dwindling and focused elsewhere, a technical "lift" will inevitably drive shares higher, which makes now a good time to hop on to the bullish train for SNAP stock.

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As someone from generation X, I'm not a fan of spending any of my social time on the Snapchat platform. But while I'm obviously not alone here, that's not a good reason for investors - old school or new school - to turn away from a low-risk, high-reward long position in Snap Inc stock.

A month ago, SNAP stock surprised Wall Street by delivering stronger-than-forecast engagement numbers from its bread-and-butter younger demographic bases, as well as many other across-the-board goodies. And with Snap's management quick to tell Wall Street it is "substantially closer to profitability" , investors did more than simply spook SNAP stock's bearish population.

Now it's time bulls suit up for a SNAP stock breakout. This is especially true given that Snap shares have driven into a key intersection on the price chart and might be receiving a helpful lift from recently IPO'ed rideshare company Lyft (NASDAQ: LYFT ) whose stock seemingly has bears' collective attention.

SNAP Stock Daily Price Chart

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It has been a very good month since SNAP stock reported earnings. As most market watchers are aware, the report throttled shares higher by 22% in the immediate aftermath. And that's great for investors that were already in it, to win it … well, almost everybody.

More importantly for the longer-term prospects and today's buyers of SNAP stock, last month's results have had the impact of shedding Snap's short interest by more than 30% to a reasonable 7% of the float. That's good news, but that's not the end of the story either.

Over the period Snap shares have also put together a fully formed uptrend. And with SNAP stock now at a critical intersection of converging resistance lines, it's anticipated a breakout is at hand as other bullish trend traders step up to the plate and the last few bears throw in the towel.

Playing SNAP Stock Long

Investors looking to position into SNAP stock should be ready to buy shares on a higher-volume breakout that's 10 cents above the consolidation high of $11.67, which has developed over the past couple weeks.

With immediate resistance cleared on strong participation, this type of breakout supports a rally toward SNAP stock's next layers of resistance in-between $13 - $15 and an area where partial profits can be locked in.

To ensure long exposure remains tethered to the breakout and a trend which remains an ally of bulls, I'd recommend placing an initial stop slightly beneath Thursday's doji low of $11.04 after new highs are established.

In some ways, the exit may seem like this position is playing SNAP stock awfully tight. However, since we're trying to catch a ride on board a legitimate breakout and with exposure limited to 6%, this looks like a good way to remain profitable, while Snap's business is still looking to turn that corner.

Disclosure: Investment accounts under Christopher Tyler's management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler's observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual.For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits .

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The post How to Trade the Breakout in Snap Inc Stock appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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