Shares of Snowflake, a cloud data-warehouse software company, dropped 8% in extended trading on Wednesday. This decline came after the company reported a widening net loss and rising costs, which overshadowed quarterly results that exceeded expectations. Despite raising its annual revenue outlook, Snowflake left its gross margin forecast unchanged, contributing to the after-hours weakness.
Snowflake’s stock has been out of favor with investors for some time. It has tumbled around 43% from its 2024 high, following the appointment of a new CEO in February and a cyberattack in May that compromised the data of several high-profile clients. This recent drop in share price further adds to the company’s challenges.
Analyzing Snowflake’s chart, it is evident that the stock had formed a falling wedge pattern since topping out in early February. A falling wedge is a chart pattern that suggests a potential upward price movement. Earlier this month, the stock broke out from the wedge, rallying from its lower trendline. The increase in volume ahead of the company’s quarterly results indicated that investors were positioning themselves for a post-earnings move. However, the stock’s decline of 8% in after-hours trading suggests that the move may be in the opposite direction.
In light of the projected post-earnings sell-off, investors should pay attention to three key price levels where Snowflake shares could attract buying interest. The first level to monitor is around $123, where the shares may find support near the June swing low. This level also aligns with a range of recent prices close to the top trendline of the falling wedge pattern.
If the stock fails to hold the $123 level, it could slide further to the $108 region. This area may attract buying interest as it corresponds to the low of the wedge pattern and represents the stock’s 52-week low.
In a scenario where the stock follows a similar downward trend as its most recent leg lower from early July to early August, the price could fall to the lower trendline of the wedge pattern, around $95. This projection is based on the bars pattern from the previous downtrend move, positioned from Wednesday’s high.
It is important to note that the information provided in this article is for informational purposes only and should not be considered as financial advice. Investors should conduct their own research and consult with a professional financial advisor before making any investment decisions.
In conclusion, Snowflake’s shares experienced a significant drop in extended trading due to a widening net loss and rising costs. The stock’s decline tested the breakout from the falling wedge pattern, indicating a potential reversal in the upward price movement. Investors should monitor key price levels, including $123, $108, and $95, where buying interest may emerge. However, it is crucial to exercise caution and seek professional advice before making any investment decisions.
