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Spotify Falls to Make-or-Break Support Level on Earnings

Spotify is getting hit hard on earnings, dipping into a key support zone. If it fails to hold, more selling could be around the corner. Let's check the chart.

Spotify  (SPOT) - Get Spotify Technology S.A. Report stock is not reacting well -- it's down about 9% -- to the music-streaming company's earnings report.

The stock is retesting this month’s low after the reaction to its first-quarter results.

The company reported a widening loss per share, while revenue was only in line with expectations. Worse, Spotify trimmed its full-year estimate for monthly active users.

Management now expects 2021 MAUs to range 402 million to 422 million, down from 407 million to 427 million.

It’s not a huge reduction, but it does chip away at the bull thesis a bit.

The report comes less than a week after Jefferies rated Spotify as a buy and after the company unveiled a price increase for some of its subscriptions.

Interestingly, MAUs are also what’s hurting Pinterest  (PINS) - Get Pinterest Inc. Class A Report on Wednesday. Will it hurt Facebook  (FB) - Get Meta Platforms Inc. Report when it reports tonight?

Regardless, it’s what's pressing Spotify, as the stock toys with a key support area.

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Daily chart of Spotify stock.

Daily chart of Spotify stock.

Unless Spotify stock can reverse some of its losses, Wednesday’s action looks concerning.

While it’s declining into the key $255 to $260 range, it’s also below a number of key levels.

Specifically, the stock broke below the 50-day, 200-day, 10-week and 50-week moving averages. It also broke back below prior downtrend resistance (blue line).

Perhaps worst of all, it couldn’t hold up over $292, a level it’s tried to clear twice now this month and failed both times.

The $292 level has been support and resistance (mostly the latter) for almost a year now. To fail so epically is not a positive sign for the bulls.

Now it’s in make-or-break territory. Below $255 puts the March low in play at $249.14. A close below that and Spotify stock could test down into the $225 to $230 area.

On the upside, let’s see if the stock can find its footing and reclaim the 50-week moving average near $275. Above that puts $292 back in play, followed by the $300 level.

Over $300 and the party can really get started. But from where we’re standing now, that looks like a tall and unlikely task in the short term.

For now, see how it handles this critical support zone.