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Key Takeaways
- Spotify shares jumped in extended trading on Tuesday after the streaming media giant topped Wall Street’s third-quarter subscriber growth estimates and issued a better-than-expected profit outlook.
- The stock has continued to track higher after retesting the top trendline of an ascending triangle, though an RSI reading over 70 signals overbought conditions.
- A bars pattern, which extracts the stock’s upward trend from January to April and repositions it from the ascending triangle’s top trendline, forecasts a bullish price target in Spotify shares of around $525.
- Investors should monitor important support areas on the streaming giant’s chart around $389, $350, and $320.
Spotify (SPOT) shares jumped in extended trading on Tuesday after the streaming media giant topped Wall Street’s third-quarter subscriber growth estimates and issued a better-than-expected profit outlook.
Shares in the Swedish-based company have more than doubled since the start of the year through Tuesday’s close as investors cheer its ability to add subscribers and manage costs while expanding its footprint beyond music streaming into offerings such as podcasts and audiobooks.
The stock gained nearly 7% to around $448 in after-hours trading Tuesday.
Below, we take a closer look at Spotify’s chart and use technical analysis to identify important post-earnings price levels to watch out for.
Uptrend Remains In Tune
Following a successful retest of the top trendline of an ascending triangle, Spotify’s shares have continued to track higher.
Importantly, significant trading volumes have entered the stock in recent trading sessions, suggesting portfolio repositioning ahead of the company’s quarterly results.
It’s worth pointing out that even before today’s after-hours pop, the relative strength index (RSI) flashed a reading above the 70 threshold. While this indicates bullish price momentum, it also signals overbought conditions in the stock that could lead to near-term retracements.
Let’s forecast a chart-based bullish price target and identify several important trading levels where Spotify shares may encounter support during dips.
Bullish Price Target
Investors can forecast a bullish price target by using a bars pattern, a chart tool that uses prior price action to predict future moves. To apply the technique, we extract the stock’s trend higher from January to April and reposition it from the ascending triangle’s top trendline, which projects a target of around $525.
We used this prior trend because it commenced following the retest of an earlier ascending triangle on the chart, the same way the stock’s current move higher started.
Important Support Levels to Monitor
Upon an initial retracement, investors should monitor how the shares respond to the $389 level. This location may provide support near several minor peaks that formed on the chart between late September and late October.
A close below this level opens the door for a decline to around $350, an area on the chart that could attract buying interest near the top of a consolidation range following the stock’s breakout from the ascending triangle.
Finally, a deeper pullback could see the shares revisit lower support around the $320 level, a chart region where investors may seek entry points near the ascending triangle’s upper trendline, which may flip from prior resistance into future support.
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As of the date this article was written, the author does not own any of the above securities.
