Snowflake (SNOW) has lost nearly 20% of its value in just nine trading sessions. The selloff occurred even though the company beat earnings expectations, proving once again that Wall Street is unforgiving when results are simply “good” rather than “perfect.” Earnings are a binary event, and market reactions to them are often unpredictable. But for mean-reverting traders like me, such extreme expedient reactions are a gift. These create a divergence between price and value, often leading to a snapback rally. Of course, the trick is timing. You don’t want to catch a falling knife. Suppose you want to wait for the floor to form. To identify the exact moment of a reversal trade, I track three specific technical signals. MACD (5, 13, 5): Utilizes a version of MACD that is tuned to catch faster signals. The indicator showed signs of a bullish crossover on December 16th, giving us an early signal that momentum was changing long before the market as a whole took hold. RSI (Relative Strength Index): The RSI is currently rising sharply after visiting oversold territory. This rapid recovery of momentum adds an important confluence to reversal theory. Finally, price action is confirming the indicator: $216 support. The six-month chart reveals that the stock is stabilizing and building a solid floor around the $216 level, proving that buyers are stepping in to protect this zone. If you’re interested in an emotionless trading system built on these principles, check out TradeWithMaya. CNBC readers receive a special 50% discount for three months. Trade Setup: SNOW 225-230 Bull Call Spread To take advantage of this rebound, I am deploying a bull call spread. The reason I like this structure here is that it combines capital efficiency with tightly defined risk, allowing you to participate in the rally without over-committing capital. This position can be entered at around $250 per spread, a price point that makes scaling trades incredibly seamless. To explain the math, an assignment of 10 contracts risks approximately $2,500 and has the potential to generate a profit of $2,500. This maximum profit will be achieved if Snowflake closes above $230 by the deadline. We’re not looking for moonshots here. For a full 100% return, the stock price only needs to rise a few dollars from its current level. My exact trading settings are: Buy $225 call, expiry January 16th Sell $230 call, expiry January 16th Number of contracts: 1 Cost: $250 Potential profit: $250 -Nishant Pant Founder: https://tradewithmaya.com/ Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader Disclosure: Nishant has an expiring SNOW bull call spread. 1/16/25. All opinions expressed by CNBC Pro contributors are solely their own and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliate companies, and may have been previously disseminated on television, radio, the Internet, or another medium. The above is subject to our Terms of Use and Privacy Policy. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The content is general in nature and does not reflect your unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Click here for full disclaimer.
