Snap Inc. Plunges: After Catastrophic Breakdown, More Downside Looms—Why SNAP Is Still a Sell

Step 1: Trend Analysis (Daily & Intraday)

Recent daily price action for Snap Inc. (SNAP) displays a robust downtrend over the last week. From the July peak (~$10.35) to the close on 8/6 ($7.78), SNAP has shed over 24%. On 8/6, a single daily bar shows an enormous gap down ($9.39 → $7.78), accompanied by an unusually high volume spike (nearly 185M shares on the 13:30 candle, 8/6 vs. ~30-40M average). This indicates a panic-driven move, most likely triggered by a major fundamental or earnings event (unconfirmed here, but volume and price speak to a catalyst).

Intraday, SNAP showed an attempted stabilization at $7.27–$7.57 (13:30–14:30), followed by a mild oversold bounce up to $7.82 into the session's end. Volume remained elevated intraday, confirming heavy supply and little sustained bounce attempt—classic fallout from a capitulation move.

Step 2: Chart Patterns

• Gap Down: A multi-standard-deviation drop that leaves a large overhead gap—historically, these rarely fill immediately after such momentum moves.
• No Clear Reversal Pattern: No visible hammer, doji, or bullish engulfing on daily or intraday candles. Price did not reclaim significant lost ground.
• Support Zone: Lowest trade at $7.27 coincided with high sell volume, but buyers defended this level. The absence of further breakdown on the day hints at a temporary floor.
• Resistance: Prior support in $8.20–$8.40, now likely resistance, as well as the gap area up toward $9.39.

Step 3: Volume & Order Flow

• Climactic Sell Volume: Largest volume candle since April, signaling possible short-term exhaustion but not reversal.
• Intraday Distribution: Most buying attempts above $7.80 were quickly sold; closes remained below each open on bounces (bearish order flow).

Step 4: Technical Indicators

• Relative Strength Index (RSI): Estimated extreme oversold (likely below 20 on daily). Typical for post-gap reactions; however, oversold does not mean imminent reversal after earnings or catastrophe declines.
• Moving Averages:
  • 20/50/200 SMA (approx, based on chart): Price is sharply below all major daily averages, confirming severe downtrend.
• Bollinger Bands: Lower band pierced hard; sometimes, a snapback occurs, but often after some consolidation or grinding lower.
• MACD: Crossed sharply down, with wide separation—momentum still accelerating to the downside.

Step 5: Volatility Analysis

• ATR (Average True Range): Significantly expanded, confirming a regime change in price movement. Expect wider ranges, abrupt moves, and unreliable support/resistance until volatility contracts.

Step 6: Fibonacci Retracements

• Using the July high ~$10.35 to 8/6 low ~$7.27. Key retracement levels:
  • 23.6%: ~$8.12
  • 38.2%: ~$8.66 Any bounce should have a difficult time sustaining above these levels in the coming day or two.

Step 7: Market Psychology/Behavioral Finance

• Panicked Selling is often followed by a short-term relief bounce, but these are often selling opportunities, not the beginning of new uptrends—especially after failed bounces and absent reversal volume.
• Value Trap Risk: Retail may be tempted to catch the falling knife in anticipation of a quick bounce, but institutional participants likely still liquidating or waiting for further capitulation.

Step 8: Seasonality & Historical Events

• Historically, SNAP post-earnings gap-downs take multiple days/weeks of base-building before a sustainable recovery. Immediate V-shaped recoveries are very rare.

Step 9: Scenarios & Trading Plan

Base Case (High Probability): Sideways-to-lower consolidation in the $7.30–$7.90 zone, possible retest of $7.27 lows; relief bounce capped by $8.10-$8.20, sellers in control unless bulls recapture $8.45+. Bear Case: Breakdown below $7.25, next target $7.00, possibly $6.75. Not enough reversal evidence to bet on a sustained bottom. Bull Case: A fast spike through $8.20 on volume; would quickly target $8.66 then $9.00, but low odds based on current structure.

Execution: All signals—momentum, order flow, trend, and failed bounce attempts—favor a short position on any rally toward $7.90–$8.00 with stops above $8.20. If price breaks below $7.27, stay exposed for an extension to $7.00.

Step 10: Position Management

• Open Short: Ideally on a weak bounce $7.85–$8.00
• Profit Target: $7.10–$7.20 (just above the round-$7 psychological level and recent intraday low zone)
• Risk (Stop): $8.20–$8.25 (above recent failed bounce and Fibonacci 23.6%)

Final Verdict

• Trend, volume, order flow, and technicals all align bearishly. With little sign of reversal, the risk/reward is optimal for a short entry on weak rallies.

Summary Table

Factor	Signal
Price Trend	Strong Down
Volume	Climax Sell
RSI	Oversold
Candlesticks	Bearish
MAs	Bearish
Bollinger Bands	Break Below
Order Flow	Bearish
Volatility	Expanded
Fibonacci	Bounce Capped
Behavioral	Capitulation

Edge: High-probability continuation lower with any failed bounce.