Why A Long Position in Pandora Media Was Great Today

Halloween is an exciting holiday, so today let's look at an exciting trade set-up - Long Pandora Media P.

Pandora is the definition of a "speculative mover," as the stock swings violently pretty much every day. While P is clearly a favorite of the fast money, that doesn't mean it's off-limits, just that it would be wise to go in with a game-plan.

Looking at a daily chart of P (see below) reveals that there is a clearly defined trading range currently happening. The bottom begins at the mid-September gap higher (which was tested and held on October 9), while the top is right around the $28 area.

This chart doesn't look too crazy, but if you look at the severity of the range, it's easy to see why P is quite the speculative play - From bottom to top, the range represents a +21.65 percent difference!

P has traveled from the bottom to the top in just eight sessions of trading from October 9 - 18. It also did so in nine sessions from September 24 - October 4. This stock moves in fast, extreme spurts, and it moves often. The goal here is to catch a retest of the $28 area. And, considering P doesn't report earnings until December 3rd after the close, what else would the fast money do in the meantime?! Kidding, but the point is that given the recent action on this trading range, P could very well test $28 early next week.

Another thing worth mentioning is the current trend channel. While P's moves have been quick and exaggerated, there is a clear uptrending channel forming on a closing basis. Even though the slope seems slight on a chart, the result is of going from bottom to top of this channel is significant.

Regarding the stop, there are really two ways to play - Using the channel's low end (as shown below - green lines) as a stop as the more conservative route, essentially setting a stop at yesterday's low ($25.00) to ensure you're not sitting for a ride to the low end of the range.

Or, you could play aggressively and use the low end of the range as your stop ($23.23). Giving P some lee-way makes sense, but understand that it's quite a ways down to that price, even if it doesn't look like much on the chart.

So, if you feel like having a bit of fun this Halloween, P looks to be a quick ride from current prices to a retest of $28, potentially netting +9.15 percent in the process.

When to Consider Entering the Trade:
Buy at the current price (~$25.58).

When to Consider Exiting the Trade:
At a close below $23.23 (Breakdown) / A close of $27.50 or above (Profit-Taking)

Disclosure: At the time of publication the editor and affiliated companies own the following positions: None

Note: Positions may be bought or sold while this publication is in circulation without notice.