NEW YORK (Real Money) -- I wish I had a dollar for every time I read a tweet or an article about Pandora's (P) demise. And while the stock has had its share of struggles, suddenly it is coming back to life. Maybe it is the demise of Grooveshark or maybe it is something else here. What I do know is looking at its chart, there is potential for a move higher if just a few more buyers step into the fray.
Pandora has spent 100 days recovering from a rough February. The current bullish channel is meeting resistance formed in December and February, just before the big break lower. The pattern in February looked very bullish, but fundamentals trumped any breakout. So what's to stop that from happening again?
The biggest plus is that earnings are out of the way, so as long as Pandora holds $18 on a closing basis, the stock should continue to march higher. A close over $18.85 would get those pesky old highs out of the way. The immediate upside is $19.50, but I would target $21.50 as the end of the summer target.
The technical picture is actually stronger than the price here. The Relative Strength Index has held over 50 since the channel started and still has room to the upside here. The vortex indicator is a bit muddled, but that's representative of the current consolidation of price just below those aforementioned highs. And we finally have a bullish crossover on the slow stochastics after a consolidation retracement. All of this points to an attractive risk-reward on an upside move. Given a stop is about $60, risk is out of hand here at just above 3% compared to an upside in the 5% to 15% range.
The longer-term weekly chart here paints a much more attractive upside target.
Pandora is fighting a much longer downtrend resistance line right here and the battle should end this week if these support and resistance lines are to mean anything. A move higher here triggers a breakout with a target of $23.50 based on the rather loose inverse head-and-shoulders pattern.
Before you get too excited about this price pattern, remember it was an inverse head-and-shoulders that failed to break out on the daily chart in February where the stock declined precipitously. I'd rather focus on the wedge and the shorter term ascending triangle. A break under $18 is bearish while a move over $19 is bullish. Actually a straddle isn't a bad play here if you give yourself a little bit of time.
If I had to guess, then I lean bullish. We have an RSI just crossing over the midline in bullish fashion, a force index going green and a vortex indicator solidly in the green. While these pushes of the force index from red to green haven't meant continued upside for over a year now, they have conveyed information. If the force index slips back into the red, we have to raise the yellow flag. Over the past year, when these price pushes have drawn the force index into the green, we've seen them fail when the force index has returned into the red. If force goes red, then this rally is likely dead.
Overall, I like this one, but I think waiting to see another quarter on the upside is well worth the price, so that's my plan. I'm looking to buy Pandora on a break over $18.82 with a stop just under $18 and three upside targets: $19.50, $21.50 and $23.50.
Editor's Note: This article was originally published at 11:34 a.m. EDT on Real Money on May 13.