SNAP has shed 43% year-over-year
Social media names Twitter Inc (NYSE:TWTR) and Snap Inc (NYSE:SNAP) are both flat in today's trading, but that could change soon. Below, we'll dive into how TWTR and SNAP have been faring on the charts, and see why history indicates now may be a good time to bet on the shares' next leg lower.
Twitter Stock Struggles Against Resistance
Shares of TWTR have been moving mostly sideways for some time, the stock struggling to break above the $31-$32 level. The social media name has shed 8.3% over the past year, and may be in store for another push lower.
The shares are running into their 160-day moving average, and similar signals have flashed six other times in the last three years, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. The security was negative 60% of the time 21 days after these signals, averaging a 4.1% loss. At TWTR's current perch of $31.32, a pullback of the same value would place the stock back near the $30 mark.
Call options traders have been targeting the social media stock. This is per Twitter stock's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands at 3.20, in the 96th percentile. In other words, calls have been purchased over puts at an extreme pace.
Further, now may be a prime time to speculate on the stock's short-term trajectory with options. The security's Schaeffer's Volatility Index (SVI) of 41% ranks in the bottom 10th percentile of it annual range. In other words, short-term options are relatively cheap at the moment, from a volatility perspective.
SNAP Shares Fail to Break Above Key Level
Snapchat parent Snap is up 79% year-to-date. However, the social media name has been unable to break above the resistant $10 level, and per White, may be due for a pullback.
Snap stock just came within one standard deviation of its 52-week moving average, after an extended period below the trendline. This bearish signal has flashed twice before, according to White's data. The security was negative each time three months after the signals, averaging a 24.6% loss. At the stock's current perch of $9.90, a similar fall would place it at $7.47.
Moving on to options data, SNAP's Schaeffer's put/call open interest ratio (SOIR) of 0.86 lands in the 18th percentile of its annual range. In other words, near-term options traders are more call-biased than usual right now.
Lastly, short interest fell 19% during the past two reporting periods on SNAP, and now accounts for a healthy 13.8% of the stock's total available float. At the security's average daily trading volume, it would take shorts more than four days to buy back their shares.