Pandora, the internet radio provider reports its quarterly earnings tomorrow. The results and guidance should be interesting to hear how the company is performing, especially with the influx of competition that is arriving (i.e. Google’s new service), as well as industry bloomers like Spotify and Rdio.
Having a look at it’s chart Pandora is showing one large sign of weariness. The accumulation/distribution indicator, which helps measure the flow of money into and out of a security. At the moment, Pandora is showing a large bearish divergence that signals more money is coming out of the stock despite it making new highs. At some point with pending confirmation from price, Pandora could take a steep drop due to the large distribution that is currently happening.
Here’s a 1 year chart – notice the divergence since mid-April of this year (price climbing higher, a/d line going south). A flag like pattern did form recently from March to April following a gap higher, which has helped continue the recent move higher towards $16.50
And a 6 month for a slightly clearer look. A break below the bottom trend line and/or the 50 day moving average would help confirm the divergence we’re seeing. In addition, having RSI break below the bullish territory its currently in would also help, for example, staying below the 50 level for a few days. The last few sessions candles are of the case that the uptrend could be running out of steam, based on the down spinning tops and harami’s being shown. It seems indecision will continue until the earnings announcement.
