If a friend treated you poorly enough times, you might feel like ending the relationship. Or at least limit the time you spend together. But as much as we ascribe human characteristics to our stocks, they are not people. Which is why Spotify got multiple chances this year even though it didn't work out a number of times.
Spotify Technology gave us a 10%-plus trade earlier this year as its moving average lines converged. We tried it seven more times since then with many of the results leading to small gains or small losses. But it's often worth it to keep trying if a stock doesn't break down and the setups are still there.
Summer Shakeouts For Spotify Stock
After a strong gap-up on its latest earnings report, Spotify gained our interest again. It pulled back slightly, losing little of its gains and then quickly rebounded (1). The relative strength line hitting a new high added conviction. Plus the S&P 500 had a follow-through that day. It was enough for us to start a full position in Spotify on SwingTrader.
The 5% jump at the highs the next day looked like we made a good decision, but then it quickly reversed and we exited later the same day with a loss (2). Downside reversals of that magnitude are a big warning sign and exiting prevented us from taking an even larger loss if we had held.
A dramatic upside reversal on Aug. 5 breached the 50-day line. When we saw a follow-up to the reversal, we tried Spotify again (3). A similar downside reversal happened the next day (4). This time we exited a little quicker in order to keep the trade positive. Instead of falling further, the stock recovered and kept going without us.
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We attempted to get back in a couple weeks later (5) but the stock never launched. After more than a week without progress we exited Spotify again before the trade went negative (6).
Fourth Time's A Charm
Hadn't we had enough? Three weeks later, we tried Spotify again (7). A strong gap up and a relative strength line at new highs enticed us to start a half position that we brought to a full position in short order. Recognizing increased volatility, we started locking in profits quickly (8) and exited completely just over a week from our entry (9). The trade was good for a quick 3.8% and gave us another win under our belt.
This was actually the 11th trade in Spotify since 2020 for a collective gain of over 40%. Three of the trades were losses. Four produced gains of less than 1%.
Of the four that worked, they more than made up for the ones that didn't. By keeping losses small, you give yourself the luxury of multiple attempts. Just one of those that turn into a big hit can make solid portfolio progress.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.
