Shares of social media company Twitter (TWTR) again showed relative strength last Friday as they lifted 4%, and by so doing also broke higher out of a bullish technical pattern. Twitter stock has exhibited notable bullish resiliency in recent weeks despite a shakier broader market, and that’s something active investors and traders could take advantage of.
When I last expressed my bullish view on TWTR on Sept. 9, I pointed to this resiliency and supportive news flow.
Since then, JPMorgan on Oct. 2 upgraded Twitter stock from “neutral” to “overweight” and upped its price target from $54 to $64 on the belief that TWTR can execute on its mobile advertising strategy.
Other than that, news flow specific to Twitter has been limited in recent weeks. But the way in which the stock has traded (i.e., range-bound but well-supported by buyers) suggests that a bigger news event might be pending.
Twitter Stock Charts
Looking at the stock’s 11-month trading history, the most bullish one-two punch action was the marginal break below the November 2013 lows in May of this year, followed by the bullish breakaway gap after the July 30 earnings report. By late August, TWTR manged to break past its lower highs from March/April and has been basing above there ever since. The bearish-to-bullish reversal on Sept. 15-16 was a good recent indication of the bullish resiliency in the stock.
All in all, the price action since late August helped Twitter stock form a higher base — a base from which it now looks ripe to launch.
Zooming in on the above daily chart, last Friday’s price action gapped Twitter stock higher out of the gate and successfully broke the stock out of its multiweek trading range. If we look closely, the stock already staged a bullish reversal last Wednesday, then continued Thursday after the JPMorgan upgrade, and finally broke past resistance on Friday. The rally came on expanding volume and finally got TWTR to separate more from its eight- and 21-day moving averages (blue and yellow lines, respectively).
When a stock such as TWTR shows relative strength during times of increased choppiness, active investors should take notice. After last Friday’s breakout, investors could now look to get long Twitter stock for a move toward the $58 area, using the $51.90 area just below last Friday’s lows as a stop-loss.
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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.
