On the bright side, the stock is well off its post-earnings lows already. In after-hours trading Pinterest stock was down about 20%. In Wednesday's regular-hours trading session, Pinterest bottomed in the first five minutes of trading, falling 17.5% at its low.
Investors are in a tough spot here. The quarter was mixed but was also pre-announced so it shouldn’t have been much of a shocker - certainly not one to cause a near-20% drop.
On one hand the selloff is concerning, and on the other hand,it feels like a bit of an overreaction.
Pinterest’s reaction is more severe than Twitter (TWTR) - Get Report and the opposite of what we saw in Facebook (FB) - Get Report. The company lost 10 cents per share and missed estimates by 2 cents, but beat on revenue as sales grew 34.7% year over year.
Whether deserved or not, Pinterest stock is retreating. It’s not our job to fight the move or decide whether it is right or wrong. It is only our job to navigate it.
I like the way shares dipped into the $16 to $17.50 area and bounced. There it finds a bevy of support, including the 38.2% retracement, the 50-day moving average and the previous consolidation zone from last month (blue box).
Now rallying, it will be key to see whether PINS stock can reclaim $19. A close above this level puts shares over the 100-day moving average and 50% retracement. It will also mean that a rebound to $20 or higher is possible.
If shares cannot reclaim this possible resistance zone, shares may retest into support. A break of Wednesday’s low likely puts the 50-day moving average in play. Below $16 and shares may decline to the 23.6% retracement at $14.15 and even fill the gap down toward $13.75.
From here though, let’s keep it simple. Let’s watch for a close over $19 on the upside and see how Pinterest stock holds up on a possible dip to the $16 to $17 area.