P daily Jan 23rd
P (Pandora Media Inc) will trigger a long entry on a break above this bullish falling wedge pattern –OR- the 17.60 level, whichever comes first. The stock is already quite extended today and may or may not need another thrust down within the wedge pattern before building the energy to mount a solid & sustained breakout. As such, if the stock were to clear the 17.60 level in the next day or so, a lower-level backtest of the wedge would be a likely possibility. Therefore, it might be prudent to take a partial position on any near-term breakout in order to add a second lot, should a backtest of the wedge occur.
Pandora was added as a short trade back in March 2014 on the break below both the ascending price channel & horizontal support. P hit the final price target (T2) for a 25.3% gain the following month and went on to move slightly lower to the highlighted 21.70 support/former final target level (T3) with the stock forming a divergence low when that key support level was reached. From there, the stock rallied over 38% and has since moved lower in a bullish falling wedge pattern, complete with bullish divergences on the MACD, RSI & CMF.
One alternative, slight more aggressive entry would be to establish a fractional long position if P were to pull back to the 16.10 level with a stop set just below the recent recent reaction low of 15.26. Although that would be a lower probability vs. waiting for a breakout above the pattern, the downside risk (about 5.3%) would be relatively small compared with the upside potential (23% & 33% to T1 & T2), should this pattern play out as expected, or about a 4:1 & 6:1 R/R.
Also note the R1 (1st resistance) level at 18.60 which could provide a level for very active traders to book quick profits (partial or full). click here to view the live, annotated daily chart of P