The technicals continue to deteriorate for Twitter Inc (TWTR) stock, and it may need to hit something of an air pocket before bottoming out.
TWTR stock looked like it was set to recover from an all-time low when it reversed trend on news that the company is handing out restricted stock to plug up a brain drain.
After all, TWTR has been in a downtrend since May and finally had a chance to arrest its slide. It had finally broken through resistance at its 50-day moving average. Maybe this period of selling had burned itself.
Then the report that talent was flooding out the door hit the tape.
The Twitter stock price failed to break out, making for the third failed attempt for TWTR in the last year.
Coming off an all-time closing low, TWTR stock looked like it had found a floor, but now, who knows? It would need to lose roughly 13% before it could even test the low. Worse, it’s hard to be confident that it will pass.
Technical analysis has a way of becoming a self-fulfilling prophecy. When a chart issues more and more sell signals and more and more chart-watchers sell, a downturn becomes almost autocatalytic.
That’s why the continued unraveling in TWTR stock is so ominous.
TWTR Stock: From Bad to Worse
Certainly there’s nothing in the fundamentals, news flow or valuation to get this thing out of its funk.
Twitter is struggling mightily to grow and monetize the social media platform at rates the market was led to expect. Nothing the company reports or says is disabusing anyone of the sense that management hasn’t got a clue what to do.
And as for the TWTR stock price, sure it looks cheap, but that’s only because it’s become the dreaded “cheap for a reason.”
Shares go for just 22 times forward earnings despite a presumed long-term growth rate of nearly 50% per year, according to a survey by Thomson Reuters. That some ugly sentiment.
If the market were confident in Twitter’s growth prospects, it would change hands at more than 50 times forward earnings.
The market usually assigns a premium to the growth forecast, Twitter, so what’s wrong with you?
Shares are now down nearly 30% for the year-to-date, 66% over the last 52 weeks and 37% short of the IPO price. Too many bulls have a bad taste in their mouths after that kind of run, and they’re right to be out of patience.
Keep a close eye on TWTR stock over the next few sessions. If it can’t show some signs of life, expect a new record low very soon.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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