SNOW sports a promising technical setup right now
The shares of Snowflake Inc (NYSE:SNOW) got a jolt at the end of August following an incredibly well-received quarterly earnings report. The rally lasted well into September, and it looked like the software stock was bucking the broader market's seasonality-driven performance. However since grazing $330 and annual highs on Sept. 17, SNOW has pivoted lower and now sports a 3.4% deficit this month. The silver lining is that this pullback has put the stock in contact with a historically bullish trendline that, if past is precedent, could signal upside in the coming month.
SNOW just came within one standard deviation of its 40-day moving average after --per the chart below -- spending a considerable amount of time above the trendline. A study from Schaeffer's Senior Quantitative Analyst Rocky White reveals that similar pullbacks to the 40-day have occurred two other times in the past three years. One month after each signal, SNOW was higher, averaging a return of 16.3%. Short-term returns following these signals are impressive as well, with Snowflake stock averaging an 11.2% jump just one week after these pullbacks. A similar rise from its current perch would put SNOW at new annual highs by the end of October.
A good portion of analysts are still hesitant on the equity. Off the 25 in coverage, 15 consider it a "hold" or worse. Meanwhile, the 12-month consensus price target of $323.51 is a 9.5% premium to current levels, which could spark upgrades and/or price-target hikes, should the stock stage a bounce next month.
An unwinding of pessimism among options traders could benefit SNOW, too. The security's Schaeffer's put/call open interest ratio (SOIR) of 1.02 stands higher than 82% of readings from the past 12 months. In other words, short-term options traders have rarely been more put-biased.
Speaking of which, now looks like a opportune time to get in on Snowflake stock's next move with options. The stock's Schaeffer' volatility index (SVI) of 43% stands higher than only 9% of readings from the past 12 months. This implies options traders are pricing in relatively low volatility expectations at the moment.