SOFI - Navigating SoFi Technologies' price dip: will $6.5 support hold?

2024-03-15 12:27:53 ET

Online financial services company,  SoFi Technologies, Inc. (NASDAQ:SOFI) has experienced a significant decline in its stock value this month, plummeting by 22% since the beginning of March.

This decline was triggered by SoFi’s announcement on March 5 of a private offering of $750 million in unsecured convertible senior notes set to mature on March 15, 2029, leading to a steep drop of over 15% in the stock price, which fell to $7.27.

Despite a brief rebound that saw the stock nearly reach $8, this recovery was short-lived, and the stock has since dipped below its recent low of $7.05.

The superstar that fizzled

SoFi Technologies emerged as a shining star amidst the exuberant frenzy of the Special Purpose Acquisition Company (SPAC) craze in the latter part of 2020, basking in the euphoria of an enthusiastic market.

Riding the wave of optimism, its stock swiftly ascended to remarkable heights, soaring above $28 just a few months later in February 2021, captivating investors with its meteoric rise.

Fueled by the backing of influential figures such as Peter Thiel and SoftBank, SoFi garnered substantial media attention, carving out a niche for itself and cultivating a fiercely loyal following among retail investors. It seemed poised for greatness, with its trajectory seemingly unstoppable.

SOFI chart by TradingView

However, the euphoria was abruptly punctuated in 2022 as SoFi’s stock witnessed a dramatic plunge from its lofty heights, crashing from over $16 to approximately $4, leaving investors reeling in shock and disbelief. The once-promising star now found itself plummeting back to earth, its fortunes suddenly reversed.

Since then, SoFi’s stock has languished within a confined range, caught in a limbo of uncertainty. Initially, it fluctuated between the narrow band of $4 and $8 (Range 1), struggling to regain its former glory amidst turbulent market conditions.

Subsequently, it attempted to find stability within a slightly higher range, oscillating between $6.5 and $10 (Range 2), as investors continued grappling with uncertainty and volatility.

Will it continue drifting lower?

When delving into SoFi’s recent short-term charts, a compelling narrative unfolds. On March 5th, a pivotal moment occurred as the stock not only breached its short-term bullish trendline but also slipped beneath the lower band of the Bollinger band indicator.

Adding to the bearish sentiment, the MACD indicator turned negative on the very same day. Despite a fleeting resurgence that briefly lifted the stock to the $8 mark, any hopes of sustained recovery quickly dissipated as SoFi descended below its March 5th lows by the end of the week.

SOFI chart by TradingView

With bears tightening their grip on the market, the outlook appears grim for bullish investors. However, amidst the prevailing pessimism, there remains a faint glimmer of hope for those on the bullish side: if the stock manages to hold above the critical $6.5 support level, it may stave off further declines.

Yet, should this crucial support falter, SoFi could find itself once again trapped within Range 1, oscillating between $4 and $8. Furthermore, the prospect of breaching the next support level, situated significantly lower at $4.2, looms ominously, potentially signaling further distress for the stock.

The Play

For investors who are bullish on the stock, SoFi at current prices provides a great 1:4 risk-reward entry with a stop-loss a few cents below $6.5 (7% lower from the current price). If the stock makes a turnaround here, it has the potential to reach the initial resistance of $9 (28% above the current price) quickly.

Bears are advised some caution here until the $6.5 level is breached on the downside, as the stock has already fallen a lot and can see violent spikes on the upside.

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