Momo Inc. (MOMO) shares moved sharply lower on Tuesday after the market was disappointed with the company's third quarter financial results. Revenue rose 125.7% to $15.16 million – beating consensus estimates by $15.16 million – and net income of 45 cents per share beat consensus estimates by seven cents per share. Despite these strong numbers, the report appeared to disappoint many investors, and the stock has moved more than 20% lower since the beginning of the week.

Most of the third quarter gains came from growth in Momo's live video service, which grew 179% to $302.6 million. In contrast, mobile marketing fell 1.4% to $17.4 million, mobile games fell 13.6% to $8 million, and other services fell from $3.4 million to just $129,000. The positive news for the company is that monthly active users rose to 94.4 million from 77.4 million, while paying users of live video reached 4.1 million alongside increases in average revenue per paying user. (See also: Why Shares of China's Momo Are on a Tear.)

Technical chart showing the performance of Momo Inc. (MOMO) stock

From a technical standpoint, the stock broke down from pivot point support at $31.28 to lower trendline support at around $26.00. The relative strength index (RSI) moved closer to oversold levels at 33.25, but the moving average convergence divergence (MACD) experienced a bearish crossover that could signal downside ahead. Traders should maintain a neutral to bearish bias on the stock over the near term given the extended downtrend.

Traders should watch for a rebound from trendline support at around $26.00 to trendline resistance at around $30.00. If the stock breaks down from these support levels, traders should watch for a move to S2 support levels at $23.94. The modest rebound during Wednesday's session suggests that the stock may be consolidating at its current levels and forming a base before potentially moving higher given the oversold RSI levels. (For more, see: This China ETF Is On Fire.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

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