SoFi Technologies Scorches Shorts As Stock Soars To New Highs: What's Next?

SoFi Technologies, Inc SOFI traded up 12.6% on Monday after breaking up bullishly from a long-term pattern Benzinga called out on Oct. 20.

The online finance company has seen a high level of retail trader interest due to the stock’s underlying statistics, which make it a short squeeze candidate:

• High Ownership Levels: 58.48% of SoFi’s shares are locked up by insiders and institutions, with insiders owning 26.22% and institutions an additional 32.26% of the available shares.
• High Short Interest: The number of SoFi shares held short has almost doubled from September. Of the 594.52 share float 46.27 million are held short, up from 24.5 million.

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The SoFi Chart: SoFi broke up from a descending trendline that had been holding the stock down since reaching an all-time high of $28.26 on Feb. 1. The bullish break was made on higher-than-average volume, which confirms the pattern was recognized.

The break to new highs also confirmed the uptrend in SoFi’s stock is still on track. After creating a bullish double bottom pattern on Oct. 18 and Oct. 27 at the $19.12 level, which was the higher low in the pattern, the stock busted up through the Oct. 21 high of $21.78, which created the higher high.

By late Monday afternoon, SoFi looked to be printing a bullish kicker candlestick pattern on the daily chart, which indicates higher prices may come on Tuesday, especially if there is sustained bullish volume. On Monday, over 41.89 million SoFi shares exchanged hands compared to the average 10-day volume of 17.48 million.

Eventually, SoFi will need to consolidate the higher prices to drop the relative strength index (RSI), which is running high at about 71%. When a stock’s RSI reaches or exceeds the 70% mark it becomes overbought, which can be a sell signal for technical traders.

On the break, SoFi was able to regain the eight-day and 21-day exponential moving averages (EMAs) as support and the eight-day EMA is trending above the 21-day, both of which are bullish indicators. The stock is also trading above the 50-day simple moving average, which indicates longer-term sentiment is bullish.

• Bulls want to see sustained momentum push SoFi up over a resistance level at $23.40. If the stock can regain the level as support, it has room to trade up toward the $24.95 level.
• Bears want to see big bearish volume come in and drop SoFi back down below the descending trendline and below the $19.12 level to negate the uptrend. SoFi has support below at $22.16, $21.19 and 19.80.
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