Shares of social media platform Twitter Inc (NYSE:TWTR) have rallied about 15% over the past few weeks and closer to 30% on a month over month basis. While possibly immediate-term overbought, TWTR stock now has a well-defined next upside target it is steering toward.
Following a few rather chaotic years for Twitter internally (at least from the perspective of investors), the company seems to have found better footing and that is also increasingly being reflected in the stock price.
From a more structural perspective, several hedge funds I speak with on a regular basis with over the past few years have found TWTR stock to be a solid bearish story. These guys over the past six months, however, have been squeezed on these short positions and are turning more bullish.
TWTR Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
For some perspective let’s turn to the multiyear weekly chart where we see that the series of higher lows and higher highs since April of this year has resulted in TWTR stock breaking past its multiyear black diagonal resistance line. The relative strength index (RSI) at the bottom of the chart since August also continues to push higher.
In other words, at present it looks likely that TWTR stock over the past nearly two years has gone through a meaningful bottoming process that could result in a notable shift in posturing in the bigger picture.
None of this means that TWTR stock, which is a volatile cat, has to continue pushing higher at the recent rate. Yet as we will see on the next chart, a well-defined upside target looms.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart note that since TWTR stock gapped higher following its earnings report on Oct. 26, it has managed to hold above the black horizontal line. This line had until then offered plenty of technical resistance in 2017. After a re-test of this line around the $19.50 area TWTR stock over the past three weeks continued the post-earnings rally.
On the chart with the blue box I marked the still unfilled portion of a down-gap from Oct. 6, 2017. The top end of this gap around the $25 area could serve as the next upside target.
Active investors and traders could still look to play TWTR stock higher toward this upside target. Any strong bearish reversal would be a stop loss on a trading basis, particularly should the stock drop and hold below the $20.50-$21 area, where near-term support lies.
Check out Serge’s Daily Market Outlook for Nov. 27.
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