Spotify Technology S.A. (SPOT) stock is trading at a two-week high in the mid-$140s in Monday's pre-market session after the European ad-supported music and podcast portal said it lost €0.79 per share ($0.88) in the first quarter, missing Wall Street consensus estimates by a hefty €0.35 ($0.39). Revenues rose an impressive 32.7% year over year to €1.51 billion, beating estimates of €1.47 billion.

The stock held a minus 179.55 price-to-earnings ratio (P/E ratio) and a $25 billion market cap before the buy-the-news reaction, with projected second quarter and fiscal year losses likely to drop that eye-catching P/E number toward minus 200. However, market players are reacting to the massive user base, led by the first quarter's 26% year-over-year growth in monthly average users (MAUs). The company expects MAUs to rise to 245 million to 265 million in fiscal year 2019.

Spotify's music platform currently boasts 217 million users in 78 countries and territories, with 100 million "Premium" paid customers, but the lack of profits has kept many investors on the sidelines. Investors are also avoiding exposure due to market-dominating competition from Apple Inc. (AAPL), Alphabet Inc. (GOOGL),, Inc. (AMZN) and Sirius XM Holdings Inc. (SIRI) that is likely to grow in the coming years, making Spotify stock a high-risk investment.

SPOT Daily Chart (2018 – 2019)

Daily chart showing the share price performance of Spotify Technology S.A. (SPOT)

The company came public on the American exchanges in April 2018, opening at $165.90 and selling off to $149 in its first publicly traded session. It bottomed out at $135.51 a day later and turned higher, stalling just above the first day's opening print in May. A higher low near $150 set the stage for a June breakout that attracted healthy buying interest, lifting the stock to an all-time high at $198.99 at the end of July.

Volatile two-sided action completed a head and shoulders topping pattern, with the neckline aligned at the high tick of the first session in the upper $160s. It broke down in October, entering a steep downtrend that broke secondary support at the April low in November. Selling pressure then escalated, generating a final downdraft that posted an all-time low near $100 on Dec. 24.

A first quarter bounce carved multiple rally waves that pierced 200-day exponential moving average (EMA) resistance in the upper $140s in February. The stock reversed at that formidable barrier and has posted a series of shallow lower highs and lower lows since that time. This morning's strong uptick is testing the last high at $146.20, posted on April 12, making it the price level to watch on Monday if you're interested in owning this risky play.

A Fibonacci grid stretched across the July into December decline places the February reversal at the .50 retracement near $150, while the 50-day EMA has set up at the .382 retracement near $140. Price action has undercut that harmonic level and bounced three times since March, highlighting the importance of holding the $132 and $140 price zone. Bears will need considerable firepower to break that trading floor, but bulls could have an equally hard time mounting resistance in the low $150s. As a result, continued range-bound action looks like the path of least resistance.

The on-balance volume (OBV) accumulation-distribution indicator posted a new high in July 2018 and tested that level three times into a fourth quarter distribution wave that hit a seven-month low in December. Buying power since that time has been impressive, lifting OBV back to 2018 resistance in February. It has been testing that level for the past two months, with a breakout ahead of price generating a strong tailwind. So far at least, there are few signs of the bullish interest needed to accomplish that task after this morning's confessional.

The Bottom Line

Spotify stock is trading higher by more than 4% after Monday morning's earnings report, even though the ad-sponsored music platform continued to post steep losses.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.