It might be time to bank on a comeback by SoFi Technologies (NASDAQ:SOFI) stock.
Source: Tada Images / Shutterstock.com
Here’s a closer look at why investors should be prepared to gain a bullish field position in SOFI stock (assuming they take a tactical approach).
But first, let’s examine how SoFi got to where it is today. Shares are off 22% since 2022 kicked off.
The challenging pressure also follows a brutal fourth quarter where bears stripped SOFI stock of around 35% of its valuation in less than two months.
Not that SOFI is alone of course. Fintech and other growth markets have taken big hits the past year. Block (NYSE:SQ), PayPal (NASDAQ:PYPL) and StoneCo. (NASDAQ:STNE) are just a few of the notable examples.
The Bullish Opportunity in SOFI Stock
Geopolitical concerns and growing worries over red hot inflation and rate hikes have only intensified the pressure on SoFi, its peers and even broader bellwethers.
But enough about weak investor sentiment and today’s doom and gloom. That’s not what SOFI stock is about going forward.
Two words give you good reason to pay attention to the stock: banking charter.
SoFi Technologies’ long-awaited approval should have bulls suiting up and stealing field position in shares from the bears. SOFI’s license will allow the well-diversified fintech to further its already robust digital-first ecosystem’s reach while improving its own financial position by now funding loans with deposits and even lowering the cost of its loans.
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However, the final word may be “Galileo,” as Bank of America’s Mihir Bhatia noted this past week.
In initiating SOFI stock with a buy rating and $17 price target the analyst was upbeat on the company’s payment processing and technology platform which exploits the trend in neobanks.
It’s easy to understand why.
Galileo makes SoFi Technologies’ competition its customers, offering it a “competitive hedge” and key differentiator in participating in the nascent industry’s growth. What’s more, today SOFI stock’s field position looks poised for a strong bullish move.
SoFi’s Weekly Price Chart
Source: Charts by TradingView
SOFI has entered its fifteenth month as a publicly traded company. Now investors have the chance to buy a bullish lifetime double bottom pattern that’s manifesting in the weekly price chart.
The slightly higher-low variation has settled into its third week of inside price action, which promises to confirm the engulfing candlestick highlighted in yellow.
Coupled with an oversold stochastics that has signaled a bullish alignment during the bottoming process, SOFI stock offers the chance to buy into a growth narrative at an attractive-looking discount backed by technical value.
All told, SOFI stock has a lot working in its favor. Agreeably though and as stated earlier, there are obvious market headwinds which could challenge a rally.
Also and fairly, technicals and pattern entries can only take investors so far. And even in the best markets, success is never guaranteed.
As such, I’d recommend a modified collar. In order to prepare for advantageous field position in SOFI, while vastly reducing the chance to get sacked, a combination April $12.5/$10 bear put spread and short April $17.5 call to hedge SOFI stock is one of the best ways to play the game.
On the date of publication, Chris Tyler holds long positions in SoFi Technologies (SOFI) (either directly or indirectly), but no other positions in securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
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