Trade of the Day: Twitter Inc (TWTR) Stock Is Itching for a Rally

Shares of Twitter Inc (NYSE:TWTR) jumped more than 3% on Tuesday on the back of an analyst upgrade. While TWTR stock through a multi-month lens remains in a consolidation phase, it increasingly looks to be attracting buyers for a potential next leg higher.

twtr stock twitter incBefore I start digging into a couple of charts, allow me to make three quick points:

  1. While I do think that Twitter as a platform has plenty of potential, fundamentally speaking there is no denying that the company has been struggling to open up the platform and make it easier to use and more straightforward to understand. User growth has been disappointing and advertising dollars have not been attracted to the platform at the rate many had initially expected. I am not here to pretend that I am smart enough to know whether Twitter will ultimately be able to become a great advertising location or if the company will just become a buyout target. What I see at this point is a stock that is starting to act better in the near-to-possibly-intermediate term and I will thus use it as a trading vehicle for the time being.
  2. The next earnings release for Twitter is scheduled for July 27, two weeks from now and could be the next toggle date for the stock, for better or for worse. As such and from a trading perspective, it is not advisable to hold trading positions in TWTR stock through this earnings report. Better trades will likely provide themselves after the report, higher or lower.
  3.  On Tuesday after the close of trading, Twitter named a new CFO, Ned Segal, to take over the role starting late August.

TWTR Stock Charts

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Looking at the multiyear weekly chart, we see that TWTR stock in this time frame has been on a one-way street lower. Drawing a couple of simple reference lines however gives us much needed perspective.

We see that at present, TWTR stock is bumping up into a confluence resistance zone made up of its long-term downtrend line (blue dotted line), its 100-week simple moving average (solid blue line), as well as the pink diagonal connecting the high points from the past year and a half. All of this makes the current juncture a critical area of technical resistance, which, if overcome, could lead to a meaningful leg higher.

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On the daily chart, we see that TWTR stock in April, following its latest earnings report, staged a meaningful rally, which kicked off with a so-called breakaway gap. This breakaway gap remains the critical point of the rally in the stock ever since. By mid June, the rally managed to retrace by an exact 61.8%, which for those following Fibonacci analysis should ring a bell as a critical support area. From there the stock began to lift again in recent weeks and following Tuesday’s 3.1% rally now increasingly looks itchy to keep moving toward the $20 area and possibly beyond.

Active investors and traders could consider buying TWTR stock on the back of Tuesday’s rally as a momentum trade toward $20 as a first upside price target. It’s important, however, is to keep in mind the aforementioned July 27 earnings date as well as to respect any strong bearish reversal as a stop loss signal.

Check out Anthony Mirhaydari’s Daily Market Outlook for July 12.

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