Reddit, Inc. (RDDT  ) stock is surging on Wednesday as market participants step in to buy following a sell-off after the company's third-quarter earnings report last week.

Broader market momentum also supports the move on Wednesday, with the Nasdaq advancing 2.18% and the S&P 500 rising 1.84%.

Reddit ended the previous week at $91.73, down 67.35% from its record high, bringing its market valuation down from $51.2 billion. Investors are taking advantage of the lower stock price.

Earnings And Traffic Headwinds

The prior drop occurred after Reddit reported quarterly results and addressed shifts in traffic. C

EO Steve Huffman said artificial intelligence search tools have driven a sharp decline in search referral traffic, with October traffic dropping by more than 1 million referrals per week on average.

Even with traffic pressures, Reddit reported third-quarter revenue rose 53% to $895 million, gross margins reached 91.5%, and average revenue per user grew to $6.87.

Wall Street Sentiment

Following the update, Wall Street firms adjusted expectations. On Monday, DA Davidson cut its forecast from $185 to $125 while maintaining a Buy rating. Guggenheim's Michael Morris reduced his forecast from $255 to $170, and Needham's Laura Martin lowered hers from $300 to $150. Wells Fargo's Alec Brondolo adjusted his forecast to $110.

The average analyst price forecast for Reddit is $194.74, 87.5% above the current price. Of 25 analysts, 14 rate it Buy and 11 Hold. Forecasts range from $110 to $300. Technical Analysis

Reddit is still in a longer-term downtrend, trading 25.1% below its 20-day SMA ($138.82) and 34% below its 200-day SMA ($157.40), so the bigger technical job is reclaiming those trend gauges before the chart looks "fixed." The bearish backdrop is reinforced by the death cross that occurred in March (50-day SMA below the 200-day SMA), which typically keeps rallies more tactical until proven otherwise.

Momentum, however, is stretched: RSI is 29.57, which signals the selling pressure has become extreme and the stock is in oversold territory where sharp countertrend bounces are common.

From a levels perspective, the current price is also much closer to the 52-week low ($89.28) than the 52-week high ($263.50), underscoring how damaged the longer-term structure remains after the recent swing low in October.

• Key Resistance: $130.07
• Key Support: $89.28