This commentary previously appeared on Real Money Pro on July 1, 2016, at 11 a.m. ET. Click here to learn about this dynamic market information service for active traders.
Are shares of Pandora Media (P) finally about to sing a bullish tune? The stock hit a high note when it popped above $16 back in December. At that time, the company benefitted from a favorable court ruling on the rates that streaming and subscription services must pay artists to use their copyrighted works.
However, the excitement surrounding that news was short-lived. Pandora proceeded to lose over 50% of its value over the following two months. Since then, the stock has been slowly building momentum.
According to Pandora's chart, that momentum may be about to reach a crescendo. Currently, there are five bullish developments taking place simultaneously on Pandora's chart.
1) Since the start of the year, Pandora has been building a cup-and-handle pattern (as indicated in the chart below). The bullish pattern suggests the stock will climb back to its December highs around $16.
2) On Wednesday, the stock closed above its 200-day moving average (as noted in red). It was the first close above that key indicator since the stock imploded in October of last year.
3) The stock also matched its year-to-date closing high of $12.52 on Wednesday (as indicated by the arrow). In other words, shares of Pandora are on the verge of a technical breakout.
4) Pandora's MACD (moving average convergence divergence) indicator is on the cusp of a buy signal (as show by the yellow shade). That buy signal will likely occur either today or on Monday.
5) The MACD indicator has been trending higher since late last year, while the stock has consolidated and formed the cup with handle (as shown by the green line). This denotes a condition known as bullish divergence, which suggests the stock will now follow the indicator higher.
Technically, Pandora still faces one major obstacle: a long-term bearish trendline (as shown by the black diagonal line). That line extends all the way back to March 2014, and is drawn from the stock's all-time closing high of $21.98. Pandora needs to break $14 to clear this hurdle.
Perhaps it is a coincidence, but Pandora's chart has come to life just as a Wall Street Journal story about a potential acquisition in its sector has hit the newswires. The Journal reported yesterday that Apple (AAPL) is in talks to acquire the privately listed rival streaming music service Tidal. If Apple acquires Tidal, the potential for a Pandora or Spotify buyout would increase. Possible suitors for Pandora would include Amazon (AMZN) or Alphabet (GOOGL).