Shares of Twitter Inc (NYSE:TWTR) stock tacked on another 2.6% on Tuesday after an already impressive run higher since its late July lows. While the company’s internal struggles are likely far from over, Twitter stock remains an attractive asset given the company’s user base and technology platform.
The technical picture for TWTR stock is increasingly pointing toward a break higher. Coupled with the potential for a buyout, Twitter looks set up for a promising trade.
When Twitter reported its latest financial results on July 26, it did grow the top line by 20% year-over-years, but many areas missed analyst expectations. The crucial user growth and user engagement metrics still aren’t impressing investors, and even the recently added live-streaming feature for sport and other events is not getting rave reviews. On the back of this latest earnings report, Twitter stock dropped. But as we will see, TWTR has rebounded in a convincing way.
Twitter Stock Charts
On the multiyear weekly chart that stretches back to Twitter’s IPO in 2013, we see that after TWTR stock broke below its 2014 lows in the summer of 2015, investors largely gave up hope in the company and exited en masse.
Notably, however, since this past February, Twitter stock has been able to hold a bottom. Also, while shares haven’t materially broken higher, the price action is looking more and more promising for the bulls.
On the daily chart, we see that although it took a few months for TWTR to find its footing following the early 2016 selloff, by June and into July, shares climbed in a more sustainable manner. Soon, Twitter stock overcame its 50-day (yellow) and 100-day (blue) simple moving averages. Those MAs have held as support over the past few weeks and are giving active investors a point of reference for risk management purposes.
After July’s earnings report, TWTR shares quickly gapped lower and dropped nearly 15%. But impressively, it took just a few days after earnings for renewed buyout rumors to resurface, and Twitter stock has pushed right back up near where it traded prior to the earnings announcement.
On the chart, TWTR stock is now visibly coiling up below a confluence technical area of resistance made up of the black diagonal line, the July highs and the red 200-day MA. The price action is constructive and points toward a potential breakout into the low $20s.
Bottom Line on TWTR
Investors are seemingly looking past the weak growth metrics of Twitter and toward a potential buyout bid of the company.
Active investors willing to participate in this potential next leg higher in Twitter stock could either begin legging into a partial long position in the stock here, or first wait for a breakout to take hold before buying. My personal favorite way to play a story such as what we are currently seeing in TWTR stock is to buy longer-dated (six months out) call options.
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