Shares of Spotify (SPOT) - Get Report  were ripping higher Monday, up 15% to $139 after the company reported a surprise profit for the third quarter.

Is it enough to get the bulls back on board? There is a key area that investors need to see Spotify stock reclaim in order to get significantly more bullish than they are now. Near that area now, Spotify stock is finding itself in a make-or-break situation even though it's putting together a solid rally on Monday.

Of course, positive news helps the bulls' case. Earnings of 36 euro cents per share smashed expectations by 65 cents, while revenue of €1.73 billion grew 28% year over year and topped expectations by €10 million.

Total premium subscribers grew 30% year over year to 113 million and beat expectations, as did gross margins. Further, management made a case for a higher stock price - literally.

From the press release:

"The business is outperforming and the stock price is down 33% vs. the consensus. Sometimes the stock price reflects the performance of the business and sometimes it doesn't. But eventually, it always does."

Trading Spotify Stock

Image placeholder title

There are a few positives and a few concerns on the chart above. On the plus side, Spotify stock has been rallying throughout the month and used Monday's news to burst it over $120 resistance. That's a great start for the bulls. However, the stock faces a lot of traffic near current levels.

It struggling with the 100-day and 200-day moving averages, currently at $137.01 and $137.23, respectively. In order to move higher, SPOT stock will need to clear this level, as well as the 61.8% retracement at $139.19.

Put simply, Spotify shares need to clear $140 to continue the upside move. If it can, the next upside levels become the 78.6% retracement near $149 and the notable $150 level. Above that and the current 52-week high at $161.38 becomes the next target.

Here's the problem, though. Should SPOT stock fail to reclaim the key $140 area, then more downside could be possible. Specifically, the 50% retracement -- near Monday's open -- sits down near $132. Below that and the 50-day moving average comes into play at $125.38, which is about where the 38.2% retracement rests.

The bottom line: Above $140 opens the door to $150 and is bullish. Over $130 keeps the setup constructive for bulls, but is not necessarily ideal. Below $125 is sub-optimal and leaves $120 on the table.

Save 57% during our Halloween Sale. Don't let this market haunt you and join Jim Cramer's Investment Club, Action Alerts PLUS. Click here to sign up!

This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.