Snap just hit a record low, but one analyst says it could bounce 20%

Social stocks have been very unpopular this week.

The SOCL social media ETF tumbled Wednesday as Facebook COO Sheryl Sandberg and Twitter CEO Jack Dorsey got a grilling from lawmakers in Congress.

Snap got caught in the crosshairs. Its shares spiraled more than 6 percent during the past two days, taking it down to its lowest levels since its public debut in March 2017.

The recent sell-offs in Snap have one analyst optimistic that the worst may soon be over.

"Over the next, say, three weeks, you're going to have a capitulation climax in this equity, and there's an extremely high probability of another 20 to 30 percent bounce and it could be like a three-, four-, five-month play," Bear Traps Report editor Larry McDonald said Wednesday on CNBC's "Trading Nation."

At least a 20 percent rally would take shares of Snapchat's parent company to around $12.22, their highest level since mid-August.

"We would start to buy the shares into the capitulation," said McDonald.

A 20 percent surge would not be enough to carry Snap out of a bear market. Its stock is 52 percent lower than its 52-week high set in February. Any drop of more than 20 percent marks bear market territory.

Others are less optimistic. A look at the charts does not paint a pretty picture for Snap, says one technician.

"Snap stands out for all the wrong reasons, unfortunately. It's especially glaring in a market that's been defined by new all-time highs recently," Instinet chief market technician Frank Cappelleri said on "Trading Nation."

Snap has walked a path to record lows as the S&P 500 and tech-heavy Nasdaq reached new highs. Both indexes most recently hit records last week.

"If you look at 18 months of its trading history now, there's been five trading gaps (four to the downside and one upside)," said Cappelleri. "It makes for a very messy chart and, more importantly, it shows a big disconnect between investors and management."

Its most recent trading gap in August was also its largest decline on record. The stock tripped 22 percent on May 2 after revenue fell short of estimates.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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