Spotify Technology (SPOT) gapped higher Wednesday as the company reported that user growth sped up and ad revenues rose in the second quarter. Let's look closer at the charts and indicators to see if the price gap is the start of a move higher or a one-day wonder.
In our July 6 review of SPOT we were positive and recommended "Traders who are not discouraged by our last buy recommendation could go long SPOT at current levels risking to $89."
In this daily bar chart of SPOT, below, we can see that the shares have rallied from our early July buy recommendation. Prices are now above the rising 50-day moving average line. The slope of the 200-day moving average line remains negative.
The On-Balance-Volume (OBV) line shows a slight improvement in July. The Moving Average Convergence Divergence (MACD) oscillator is crossing the zero line for an outright buy signal.
In the weekly Japanese candlestick chart of SPOT, below, we can see some improvement in the technical clues. There are a number of lower shadows below $100 in the past three months. This tells us that traders are rejecting the lows.
The weekly OBV line made a sharp move up in May and has only given back part of that aggressive buying. The MACD oscillator has generated a cover shorts buy signal.
In this daily Point and Figure chart of SPOT, below, we can see that prices made a new high for the move up at $120. This move refreshes the uptrend and opens the way for a potential rally or price target of $158.
In this weekly Point and Figure chart of SPOT, below, we can see a longer-term target in the $170 area.
Bottom-line strategy: Regular readers of my articles should know that I prefer to buy strength instead of buying dips. Traders could use strength in SPOT above $122 to go long or add to longs. Continue with the stop at $89 for now. The $158 area is our price target for now.
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