Stock Of The Day: Will Snowflake Refill The Gap?

Snowflake Inc. SNOW shares are trading much higher Thursday. The company reported earnings and investors liked what they heard.

There is a chance the stock may break out above resistance and continue to move higher. This is why our trading team has made it our Stock of the Day.

Fourth quarter earnings came in at 30 cents per share. The Street was looking for 18 cents.

Revenue came in above estimates as well. For the quarter it was $943.3 million. This was well above the $914 million consensus. As you can see on the chart there has been resistance for Snowflake around the $194 level. If this resistance breaks a rapid move higher may follow.

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One of the main reasons why resistance forms in a market is because of remorseful buyers. These are people who regret buying a stock if the price drops after.

Some decide to sell their positions, but don't want to lose any money. So, they hold on to their positions and vow to sell if they eventually can exit at breakeven. As a result, if the stock returns to their buy price they place sell orders.

On Feb. 28, 2024, Snowflake closed at $230.75. The following day it open close to the $181 level. Because there was no trading in between these prices, it appears as a blank space on the chart.

Traders call this a “gap.” They also say “gaps refill” and that may be the case here.

If there was no trading between these prices, then by definition there was no one who purchased shares in between them. That means if the stock goes back into these levels going in the opposite direction, there won't be any remorseful buyers trying to sell their shares.

The lack of supply, or sell orders, from this can create a problem for buyers. They may have a hard time finding someone to sell them shares or forced to bid premiums, which could cause the stock to move rapidly higher. This may result in the gap “refilling.”

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