Spotify Stock Chart Looks Great for Bulls

Analyst tailwinds could come from overdue upgrades for the outperforming stock

May 10, 2024 at 12:04 PM
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Subscribers to Schaeffer's Weekend Trader options recommendation service received this SPOT commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

Shares of Spotify Technology SA (NYSE:SPOT) retested their 50-day moving average after earnings late last month, and are now trading above all major trendlines. The equity also filled a post-earnings gap, which potentially shook out weak-handed bears. A third attempt to breakout from the round $300 mark and move above that level could see a run on higher strike to $330 or $340. Adding to this bullish technical setup, SPOT just bounced right into a stacked put open interest level at the 280- and 270-strike.

A shift in options trader sentiment could help the shares move higher. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security’s 50-day put/call volume ratio of 1.15 is higher than 86% of annual readings. It’s worth noting that this ratio has rolled over from a peak, and price action tends to shift higher in the instances.

Short interest is relatively low, but the shares have rallied amidst a near 50% build since early December. And despite the outperformance, 11 covering brokerages still recommend a tepid “hold” on SPOT.

Amid a post-earning volatility crush, now looks like the right time to speculate with options. Spotify stocks' Schaeffer's Volatility Index (SVI) of 34% ranks in the low 11th percentile of 12-month readings, meaning options traders are pricing in lower-than-usual volatility expectations.


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