Reddit Price Levels to Watch as Stock Surges on Strong Earnings, Outlook

Key Takeaways

• Reddit shares surged in premarket trading on Wednesday after the company reported earnings that topped estimates and provided a strong outlook, as the social media platform benefits from robust digital advertising spending and lucrative AI content licensing deals.
• Since going public in March, Reddit shares oscillated within an ascending triangle before breaking out above the pattern’s top trendline earlier this month.
• The measuring principle, which calculates the distance between the ascending triangle’s two trendlines and adds that amount to the breakout point, projects an upside target in the stock of $115.
• During retracements, investors should monitor important support levels on Reddit’s chart around $75 and $65.

Reddit (RDDT) shares surged in premarket trading on Wednesday after the company reported earnings that topped estimates and provided a better-than-expected outlook amid robust digital advertising spending and lucrative artificial intelligence (AI) content licensing deals.

The company guided fourth-quarter revenue of between $385 and $400 million, handily surpassing the $357.9 million consensus view. While advertising sales generate the majority of Reddit’s revenue, AI licensing deals with Google’s Gemini and Open AI’s ChatGPT add a valuable boost to the social media platform’s top line.

The stock was up more than 22% to around $100 in recent premarket trading. Through Tuesday’s close, Reddit shares had more than doubled since going public in late March and were up 24% over the past month.

Below, we break down the technicals on Reddit’s chart and point out important post-earnings price levels to watch out for.

Ascending Triangle Breakout

Since its March listing, Reddit shares oscillated within an ascending triangle before breaking out above the pattern’s top trendline earlier this month.

Moreover, the relative strength index (RSI) confirms bullish price momentum in the stock with a reading nearing the closely watched 70 level, but also cautions looming overbought conditions. It’s also worth pointing out the stock registered its largest daily trading volume since early August on Tuesday, as investors placed bets ahead of the earnings report.

Let’s use technical analysis to project a possible price target and also identify several key support levels where the stock may find buying interest during pullbacks.

Key Upside Price Target to Watch

To project an upside price target, we can use the measuring principle, also known as a measured move. 

This technique works be calculating the distance between the ascending triangle’s two trendlines and adding that amount to the breakout point. For example, we add $40 to $75, which forecasts a target of $115, around 41% above Tuesday’s closing price. 

Investors who have purchased the stock a pre-breakout levels may decide to lock in profits around this area, especially if other indicators are pointing to overbought conditions.

Important Support Levels to Monitor

On an initial retracement, investors should keep a close eye on the $75 level. This area on the chart could attract buying interest near the ascending triangle’s top trendline, which may have flipped from a location of prior resistance into future support.

Selling below this level could see the shares revisit $65, a region just below the ascending triangle’s lower trendline where the price may encounter support near a horizontal line connecting a range of similar trading levels on the chart between mid-May and early October.

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As of the date this article was written, the author does not own any of the above securities.