The Pandora Roller Coaster: Get Ready for a Climb

| About: Pandora Media (P)

This story could not be scripted any better for traders in Pandora (NYSE:P). The company has a new competitor entering the space and the stock drops over 6%. What exactly is Spotify doing that justifies such a drop? The reality is that while Spotify will indeed grab some momentum with its U.S. launch today, things will settle down and Pandora will remain on top the Internet radio hill.

When something like this happens there tends to be a knee-jerk overreaction. Spotify is not going to take down Pandora in 24 hours, and likely will never approach the types of revenue in the U.S. that Pandora already enjoys.

From my perspective any time Pandora dips down toward its $16 IPO price or below, it is a buy for trades. The equity has been ranging between $17 and $20 since the initial fever when the company went public. It seems to happen like clockwork. A 3% or 4% correction followed by a gain of the same. This will likely be the trend until the company reports earnings and people can begin to digest the real performance of the company rather than betting on potential.

Investors should use the dip created on the Spotify news to initiate a buy and ride the next rise in this roller coaster. We can see an established trading range, now it is time to take advantage of it. In my opinion next week will see Pandora recover the dip from the Spotify move and test $19 with relative ease. Simply stated, it is time to initiate a trade on Pandora.

Beware, however. Roller coasters are only fun when your timing is right.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.