Wells Fargo raised its price target on Reddit to 187 from 176 while holding an equal weight rating on the shares. The firm's reasoning came down to ad checks staying strong in Q2, with an expectation that Q3 revenue lands slightly ahead of consensus. Even with that upgrade, the shares sit down nearly 13% year-to-date, though they traded higher in the pre-market on the day.
The year-over-year picture
The one-year performance tells a different story from the year-to-date figure. Over the past year the stock is up 31%, but it has pulled back notably from its highs. For now it outperforms both the S&P 500 and the communication sector ETF XLC, the sector Reddit belongs to. Stacked against its direct social media competitors, Reddit stands out as the best performer of the group, outpacing Match Group, Meta Platforms, Spotify, Pinterest, and Snapchat. The subgroup itself isn't the strongest corner of the market, yet within it Reddit is the standout name.
Reading the candle chart
The relevant low sits at 119.27. From there the stock climbed about 68%, a sharp and quick move to the upside. The slope along the lows runs more moderately, and duplicating that line and placing it across the highs produces a channel shape that price is now starting to break above. A steeper trend line drawn across the more recent lows captures the current momentum.
With that break underway, the natural question is where support and resistance sit if the climb continues. One gap stands out on the way up. It formed shortly before the February earnings event and falls between roughly 204.50 and 212. Price poked into that zone the prior day but made no lasting progress there. Higher up, 235 marks an old low and the area near 263 marks old highs, so both stand out as upside reference points. To the downside, there is an old set of highs near 187 and a band of relative lows near 152.50.
Moving averages, momentum, and volume
The moving averages had been clustered tightly together. They are now beginning to separate, with the faster averages pulling beyond the slower ones. A confluence remains down near 167 to 168. The RSI is improving and trending upward, though it stays short of overbought territory, which leaves some room before the move looks stretched. The volume profile study shows price crossing into a higher-volume area. There is no single clean node, but between about 200 and 240 the trading activity thickens considerably.
A neutral trade idea
The setup behind the trade is worth spelling out. The price target increase landed below current prices, and the rating stayed at equal weight, which argues for a neutral rather than directional stance. The trade targets the July 17th expiration, a window of plus or minus about 11%. The structure is an iron condor: short the July 17th 225 and 230 calls and the 180 and 175 puts, taken for a 150 credit. That puts max loss at $350 and max profit at the $150 credit received.
With 10 days to expiration, this is a shorter-term trade built around the expectation that the stock stays inside the range the options market is pricing in. The break-evens come in at 178.50 and 226.50, each roughly 12% away, against an expected move of about 11.2%. The idea is to lean on those probabilities and keep the credit over the next week and a half.
