The stock market rally continued on Wednesday, pushing many of the major U.S. indices to fresh all-time highs. But the rally also reached into some stocks such as Twitter Inc (NYSE:TWTR), which has been (relatively) dormant for the past weeks. While one day does not make a new trend, Wednesday’s price action in Twitter stock does raise the probability of some follow-through buying in coming days or weeks.
Through the lens of technical analysis, this is worth further inspection.
When I last mused about Twitter stock on Aug. 10, I offered that the hopes of a company buyout, coupled by the coiling up on the chart, could soon lead to a pop into the low to mid-$20s. A couple of days later, TWTR reached $21 — a 13% rise from the day of my article. And by early October, the stock reached above $24, or more than a 30% rally since my Aug. 10 article.
This thus qualified my price targets. With a nod toward risk management, I exited any long positions in Twitter stock.
In fact, Twitter is a case study in and of its own this year as one takeover rumor and fallout after another bumped shares around in a wild manner. Yet, with the right set of tools and a good amount of patience, one had the opportunity to make some really, really good money in TWTR stock this year.
My No. 1 rule when it comes to jumpy and volatile stocks such as TWTR is to let the stock come to my price levels of interest. Those buy or sell points can be lower, or higher, or base around a breakout or other technical happening. It’s important not to jump the gun and let these types of stocks come to my points of interest. That way, I can enter trades more calmly, and I ultimately stand a better chance of sticking to my predetermined risk management plan for the trade.
While Twitter has been somewhat less prevalent in the news over the past month and a half after takeover talks apparently fell apart in early August, the company has been making moves such as buying Yes Inc as well as making some notable management changes.
Twitter Stock Charts
On the multiyear chart, we see that TWTR remains in a lousy state from this angle. The brief pop in September was quickly rejected in the mid-$20s at a former horizontal support area and that pushed the stock back lower.
From this angle, there is little to say other than the stock might be trying to establish a more respectful relationship with its red 200-day moving average.
Note that Twitter stock pushed above this moving average in August, and that while briefly pushing below it in mid-October, it has largely respected it as support ever since.
On the closer-up daily chart, we see get a better sense of the choppy mess that TWTR left behind in September and October. Here we also see better how the red 200-day moving average is trying to act as a reference line of support.
Note that since the takeover talks fell apart in October, Twitter dropped below its yellow 50-day MA and had been struggling to pierce back above it. This changed on Wednesday, as the stock’s 6.3% high-volume rally accomplished a push back above the average.
While Twitter stock in my eyes still needs to prove that it can get above and hold around the $19.50-$20 area, this does now increase the odds of an eventual push back into the low $20s, which would begin a partial gap fill of the big down-gap from Oct. 6, which I marked with the blue box.
More aggressive traders may already try to nibble a little on TWTR. More risk-averse market participants may want to wait for some follow-through buying after Wednesday’s initial pop before buying some Twitter stock for a trade.
Any bearish reversals from here would call off the new upside momentum hopes until a next stronger bullish reversal.
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