During Monday's Mad Money program Jim Cramer asked what should investors do with Spotify Technology (SPOT) , the music streaming service that was a red-hot IPO in 2018 but had seemingly lost its mojo until recently? Cramer said Spotify is back and it's time for investors to step up and take notice.
Cramer explained that about a year ago, Spotify announced its plans to diversify away from just music streaming and to dominate podcasting as well. The move confused shareholders.
But Spotify has since proven the naysayers wrong. Not only has the company thrived during the pandemic it's also beginning to see the fruits of its many podcast acquisitions. After announcing the addition of Joe Rogan's podcast to its growing network in May, shares of Spotify have been rallying hard.
Cramer said Spotify's podcast strategy reminds him of when Netflix (NFLX) first started producing its own original content.
Let's check out the charts of SPOT.
In the daily bar chart of SPOT, below, we can see that prices traded sideways in a $110-$160 consolidation pattern. Prices launched into a strong uptrend in May and it has continued this month. SPOT is above the rising 50-day moving average line and the rising 200-day moving average line.
The trading volume has been increasing since early February and the On-Balance-Volume (OBV) line has been very strong since early April telling us that buyers of SPOT have been very aggressive. The Moving Average Convergence Divergence (MACD) oscillator turned bullish in the middle of April and it is still very strong.
In the weekly bar chart of SPOT, below, we can see the sideways consolidation pattern and the upside breakout. Prices are above the rising 40-week moving average line.
The weekly OBV line has been strong and made a new high for the move up. The MACD oscillator moved above the zero line last month for an outright buy signal on this longer time frame.
In this Point and Figure chart of SPOT, below, we used weekly close-only price data. Here the chart shows a potential price target of $325.
Bottom-line strategy: SPOT looks extended when compared to the 200-day moving average line. This might mean prices dip to around $240 before renewed buying enters. Traders could use this dip, if it happens, to go long or add to longs. Risk a close below $220 now. The $320 area (a double from the top end of the $110-$160 consolidation area mentioned above) is the price target.