Trading Nation

One stock that's tripled Facebook's gains this year may have hit a wall, technical analyst says

Where Snap heads next after mega rally

Snap could be about to give up the ghost.

The stock has seen a massive 183% rally this year, triple the gains for Facebook, but one technical analyst warns that the stock may have hit a ceiling.

"There's some psychological resistance" at the $17 mark, which is level with its 50% retracement from its peak, Bill Baruch, president of Blue Line Futures, said Friday on CNBC's "Trading Nation."

The messaging app debuted at $17 a share on the New York Stock Exchange in March 2017, spiking to a high of nearly $30. Its 50% retracement marker at $17.13 now represents a level Snap will struggle to move beyond, says Baruch.

"That's a lot of resistance right there," he said. "In quarter one 2018, that was where it did stall and start to fail. So, I think you don't want to chase the market into that."

Another technical indicator, the average directional index, is also flashing a warning, says Baruch.

"There's some headwind on the ADX because it has had lower peaks over time," he said. "The ADX shows how well a market is trending. So, if the trend starts to stall out, aligning with $17, you don't want to be buying into here."

He would buy the stock on a pullback to $13, which intersects its 50-day moving average. A move to $13 marks 17% downside.

The fundamentals story for Snap also looks troubled, says Gina Sanchez, CEO of Chantico Global.

"One of the problems with Snapchat wasn't ever the fact that it can create user growth or subscriber growth. It was whether or not it could monetize it into revenue growth," said Sanchez. "The more that they try to monetize means that they're going to be adding ads onto that platform, and the user base that they have has zero tolerance for ads. And so, I'm not sure that this is going to last."

Snap is expected to post 36% sales growth in its second quarter when it reports earnings on July 23, according to FactSet. That would be a slowdown from 39% growth in the first quarter.