Momo Inc. (MOMO) shares rose 12% during Tuesday's session after the Chinese mobile platform reported better-than-expected fourth quarter financial results. Revenue rose 44.7% to $559.1 million, beating consensus estimates by $22.65 million, and earnings per share came in at 59 cents, beating consensus estimates by seven cents per share. Monthly active users also rose from 99.1 million to 113.3 million, while paying users rose from 7.8 million to 13 million.
The stock is trading more than 30% off of its 52-week high, but it rallied more than 60% from its 52-week low made in December 2018 following its third quarter earnings report. Morgan Stanley downgraded Momo stock to Equal Weight from Overweight and reduced its price target from $61.00 to $30.00 following the third quarter financial results. Momo's management is meeting with JPMorgan and Benchmark analysts following the fourth quarter results, which could lead to bullish forecasts.
From a technical standpoint, Momo stock reached the top of its bullish price channel following Q4 earnings, but it remains below key 200-day moving average and trendline resistance. The relative strength index (RSI) is moving toward overbought levels at 65.17, while the moving average convergence divergence (MACD) could see a near-term bearish crossover. These indicators suggest that the stock could give up some ground before breaking out from key resistance.
Traders should watch for some consolidation below trendline resistance at around $38.00 over the near term, with strong support near the pivot point at $32.32. If the stock breaks out from trendline resistance, traders could see a move toward R2 resistance at $39.71. If the stock breaks down from trendline support, traders could see a move to the 50-day moving average at around $30.00 or S1 support at around $20.00.
The author holds no position in the stock(s) mentioned except through passively managed index funds.