Twitter Inc (NYSE:TWTR) rallied another 6.72% on Wednesday, bringing its three-day total to more than 20%. While the rally in Twitter stock was helped by a general risk-on attitude in the broader market, TWTR on Wednesday accomplished a good technical breakthrough.
Right now, Twitter is in a better near- to medium-term position — one that traders and more active investors can leverage to find better risk-reward opportunities on the long side of TWTR.
Between weak user growth, an apparent lack of strategic vision and generally amateur PR, Twitter over the past year or so has become somewhat of a pinata for traders and investors alike.
Most prudent analysts and investors at hedge funds and other smart-money outfits that I speak with on a daily basis see tremendous value in Twitter, and I agree. No other social media outlet makes it as easy to share and spread news. The amount of valuable information shared on Twitter on a daily basis is unparalleled, yet there is no easy way for users to get that information without having to scroll through masses of tweets. From a high-level perspective, TWTR must attach a hose to its information feed rather than a straw, which in my opinion would instantly make the platform more user-friendly and see undergrowth accelerate again.
Of course, that may be easier said than done, which is why Twitter stock remains in a broad-based down-trend.
Twitter Stock Charts
Starting off with the big-picture view since Twitter’s 2013 initial public offering, we see that TWTR stock very recently (Feb. 11) reached fresh 52-week and all-time lows. Interestingly, this low matched with the lower support line on the chart and came on a notable higher low in momentum versus the momentum lows in January. This positive divergence between price and momentum could indeed support Twitter’s stock price in the medium-term.
I might also offer that although no firm rumors are making the rounds at the moment, TWTR in my mind remains a prime takeover candidate in 2016.
From a pattern perspective, TWTR remains in a firm downtrend on the big-picture chart and not until a break-and-hold out of the falling wedge pattern takes place does that change.
Moving on to the daily chart, we see that last week, Twitter pushed below horizontal support around the $15.50 mark (black horizontal), but after the recent three-day rally the stock has quickly pushed back above there. With Wednesday’s rally, Twitter stock also has meaningfully overcome its yellow 21-day moving average for the first time since last October and pushed against a first diagonal resistance line (red dotted line) from the October highs.
TWTR: The Trade
Twitter stock might be somewhat stretched following a three-day, 20%-plus rally. However, unless the stock breaks back below the $15.50 area, buy dips and consolidation periods as TWTR gravitates back toward the $20 area in coming weeks.
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