Twitter Inc – TWTR Stock a Clear Buy Thanks to the Rumor Mill

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Shares of social media company Twitter Inc (NYSE:TWTR) jumped during Tuesday trading on the back of a rumor about a potential buyout by Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL).

https://investorplace.com/hot-topics/beat-the-bellAs a major social media player, TWTR stock often is considered to be “in play,” but more importantly to traders, Twitter shares accomplished a respectable technical move on Tuesday that investors and traders can seek their teeth into.

Tuesday’s rumor mill included reports that TWTR has hired an investment bank to fight off a takeover bid. As many rumors go, details were vague, but one potential acquirer that keeps coming up is Google.

It’s well-known that Google’s social media strategy lacks depth (sorry, G+) and that it’s trying to expand in this space … but would GOOGL really be willing to buy a major publicly traded company that would command a steep premium? Not to mention, any bid would face an uphill battle with TWTR stock holders that believe in Twitter’s own organic growth story.

Here’s where the trade comes in: Whenever a company is surrounded by takeover rumors, the going can get choppy. Luckily, technical analysis can be a lot of help in this kind of situation.

As we’ll see on the below TWTR stock charts, the constructive price action year-to-date has given investors plenty of signs to look at the stock from the long side.

TWTR Stock Charts

Looking at the weekly Twitter stock chart stretching back to its initial public offering date in November 2013, we see that the price action in February and March has pushed TWTR past its diagonal resistance line from the late 2013 top.

What’s even more constructive, however, is that the breakout took place after TWTR stock formed a notable higher low in December and January. Whenever resistance trend lines are broken on the back of a higher-low formation, the breakout gains some credibility.

twtr stock charts weekly
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On the daily chart, it is the breakaway gap rally on the back of the early-February earnings report that ignited upside momentum and, as a result, quickly broke TWTR shares back above their 200-day simple moving average (red line) for the first time since last August.

Healthy stocks tend to begin to consolidate after a big rally, which is exactly what Twitter stock did during the first part of March before rallying again. Over the past few weeks, TWTR stock again consolidated, taking the shape of a pennant formation that appears to be bullish in nature. Tuesday’s nearly 4% rally then cleanly broke Twitter shares out of said formation, which barring any sudden bearish reversal now gives us a target somewhere in the high $50s.

twtr stock charts daily
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Active investors should look to buy TWTR for a momentum trade on a push above Tuesday’s intraday highs around $53.30.

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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.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/04/twitter-inc-twtr-stock-buy-rumor-mill/.

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