Twitter (TWTR) Still Has Room to Run

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twtr - Twitter (TWTR) Still Has Room to Run

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Shares of social media company Twitter (TWTR) rallied on Monday on the back of the company’s testing of an e-commerce initiative. The stock is now sharply higher since its early-May lows and could offer active investors an opportunity to trail the stock higher.

beat the bellTwitter announced that it will be testing out a “Buy” button that would allow users to buy products and services directly from within a tweet. While this initiative is only in its testing phase, it is giving investors hope that Twitter can turn into a meaningful e-commerce player, which given the number of users is certainly not far-fetched.

On Aug. 14 in this column I discussed a trade in TWTR stock with an entry point around $45 and an upside price target near the $50 mark. The price target has since been reached, netting traders a cool 11% in just a couple of weeks. With the price target reached, it’s now time to re-evaluate the TWTR stock chart and see where a next trade in Twitter could begin to set up.

On the 10-month chart below, stretching back to the November 2013 IPO date, the most bullish development for the stock was its breaking below the post-IPO lows this past April. TWTR stock saw exhaustion selling at that point — traders proverbially throwing out the baby along with the bathwater, which inevitably created positive divergence between price and momentum, leaving the stock only one way to go: higher.

twtr10months
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Zooming in on the daily chart, the second-most bullish development on the chart of TWTR stock was the post-earnings breakaway gap on July 30. The move cleanly broke the stock back above the diagonal resistance line from the December 2013 top. TWTR stock then stood a good chance of continuing higher after some consolidation — and that’s exactly what happened. After a couple of weeks of consolidating the rally, TWTR stock broke higher out of the bull flag (black parallels) that it had formed, and TWTR stock on Aug. 28 overcame the post-earnings highs from late July, which also coincided with horizontal resistance stretching back to the spring.

On Sept. 3 TWTR stock scared the bulls with a bearish reversal day, but it bounced higher the very next day off the 8-day simple moving average (blue line). Monday’s rally then took TWTR stock back above last week’s highs, closing it at levels not seen since early March.

Upside momentum looks to remain intact, and active investors and traders can now trail the stock higher using the 21-day simple moving average (yellow line), which currently also coincides with the previous horizontal resistance area around the $47 area.  If momentum sustains, I suspect TWTR stock will soon revisit the mid- to high $50s. Traders could consider working this trade using trailing stops or options, or a combination of the two.

twtrdaily
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/twtr-stock-twitter/.

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