What is Next For Sofi?

Sofi was one of the first fintech companies to gain a federal banking charter, essentially making it as much of a bank as the big guys like JP Morgan Chase and Wells Fargo. This puts Sofi a step ahead of its fintech counterparts. It is more than just an internet bank as they offer federaly insured financial products just like regular banks. With solid fundamentals like this, why has the stock performed so poorly?

Over the past few years since going public, for one reason or another, Sofi has struggled to attain positive operating cash flows and a positive net income. This has likely put pressure on its share price over the years. The past two quarterly earnings reports have shown a very strong improvement in these two categories. If this improvement continues, then Sofi's financials will look a lot better to investors.

Today, Sofi's quarterly report beat expectations, but the stock fell on lower than expected guidance and a mention about higher interest rates negatively affecting certain apsects of their business.

This lower than expected guidance caused a significant sell-off of over 10% at one point. But is this negative guidance induced sell-off appropriate based on this small guidance miss?

If I remember correctly, I believe annual earnings expectations going several years out are double or even triple the annual income that Sofi is expected to make in 2024. If analysts are right about the future earnings potential of this company, then any sell-off should present a great dip buying opportunity.

The lower it goes, then the better the discount. If this is the case, then where is a good spot to watch for a potential dip buy opportunity? For this, we must look at the charts.

Several weeks ago, SOFI dropped out of its previous upward pricing vector. This was a very worrysome look for the long-term technical picture. The trend has since shifted into an almost perfect downward sloping price channel. This is the new trend to follow.

More recently, the price action has been forming somewhat of a base as the price has been confined within two long-term Fibonacci levels. If the price drops below this baseing pattern, then I would predict that investors will be covering their long positions. We might see more sellers stepping in at that point.

If we zoom in to the shorter timeframes, we can see how the price action is rangebound between those Fib levels that I mentioned. Right now, after the big sell-off, the price is sitting just above support of this range, which is at the $7.00 price point. Will we see another rebound at this support level? Or will we see the price breakdown below support? Personally, I would play the range by buying at support and selling at resistance until we see a breakout or a breakdown.

One thing that worries me is the big red volume candle that coincided with the very bearish day. This could be just a spike in volume due to earnings. But very often, you will see the biggest volume candles near the tops and/or bottoms of a rally or sell-off. Is this big volume candle a fluke? Or is this just the beginning of a sell-off?

Personally, I am bullish towards the long-term prospects of this company. And I would not mind if the price drops a little as I would probably average down eventually. But in the mindset of a swing trader, the picture is looking somewhat bearish because the long-term trend is downward, and we just saw a very negative earnings reaction.

I wouldn't worry too much as long as the price stays within range of the two Fib levels that I have mentioned. But if I see a breakdown, then I would cover any long position and look for a good technical level to buy the dip. If I see a breakout above the range, then I will consider buying the breakout.

I am not a fan of buying a breakout as options premiums are likely already elevated at that point. But in this case, Sofi is at a historically low price, so I wouldn't mind buying this kind of breakout. But I must see a continuation above the long-term resistance level that Sofi has not been able to climb above for several months. At that point, I would be fully confident that a long-term uptrend is in the works.

As always, I am not a financial professional, and this is not investment advice. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Don't invest money that you can't afford to lose. Give some of your investments time and know when to cut your losses.   

Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. Do your own due diligence. And just follow the trends. A trend is your friend. Good luck trading.