Spotify (SPOT) reached an agreement on Wednesday with Alphabet (GOOGL) to allow alternative app payments. The deal allows the streaming giant to offer its own billing service within its app, paving the way for other developers to regain billing control from app stores amid antitrust concerns.
In our January 31 review of SPOT we wrote that "Shares of SPOT could bounce with a rebound in the broad market averages but with plenty of overhead resistance. I do not anticipate that SPOT will get very far on the upside. Avoid."
Let's check and see if this latest news on SPOT can help revive the charts.
In this daily bar chart of SPOT, below, we can see that prices sank still lower after our end of January review. A low can be seen now in the middle of March and prices have bounced back towards the declining 50-day moving average line.
Trading volume has not expanded much in recent weeks and the On-Balance-Volume (OBV) line shows a decline into the middle of March. The improvement in the OBV line may be just a bounce in an ongoing decline.
The Moving Average Convergence Divergence (MACD) oscillator has turned upwards for a cover shorts buy signal.
In this weekly Japanese candlestick chart of SPOT, below, we can see a bullish engulfing pattern in March to mark a bottom reversal. A sideways trend may develop instead of a sustained rally. Prices are trading below the declining 40-week moving average line.
The weekly OBV line shows a decline from December 2020. The MACD oscillator is bearish with only a couple of weeks of narrowing. A buy signal could be weeks away.
In this daily Point and Figure chart of SPOT, below, we can see a potential upside price target in the $199 area.
In this weekly Point and Figure chart of SPOT, below, we can see that prices reached and exceeded a downside price target of $185.
Bottom line strategy: SPOT has made a significant correction and prices are back to the area where SPOT based in 2019. The weekly bullish engulfing pattern suggests that prices have made a low but a new base pattern needs to play out in the weeks and months ahead. Be patient and let other traders and investors do the base building.
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