Shares of Twitter Inc (NYSE:TWTR) leaped higher by 4.8% on Monday, continuing their so-far stellar 2018 rally and also marking another breakout move that now eyes a next well-defined upside target.
The last time I offered my take on Twitter stock in this here column was on Dec. 15. At the time, I discussed that the stock has broken out of a longer-dated basing phase and looks to have plenty of upside for the patient. The next immediate-term upside target I offered at the time was the $25 area, which the stock reached with a 10% rally just two days later.
While there are near-term trades to be had, I find that given the chart dynamics and fundamental turnaround story in TWTR, this is a stock best to own and not to over-trade. Twitter stock can be a volatile puppy and any stop losses set too tight stands a good chance of getting hit.
Twitter Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
As such and for perspective, let’s get an updated look at the price history of TWTR stock on its weekly chart. This chart stretches back to the company’s initial public offering date in 2013. Here we see that although the stock stopped falling in early 2016, it then slipped into a lengthy bottom-building phase that through the lens of technical analysis 101 did not end until December 2017, when it broke past both diagonal resistance (purple dotted line) as well as out of the two-year sideways consolidation phase.
The rally since then has seen the stock break above its red 200-week simple moving average and now sits inside a price band (blue box) that has offered both support and resistance since 2014.
To be clear, all of this is constructive price action from where I sit.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart we see that after an initial post-earnings rally in February, the stock began to consolidate along with the broader market volatility spike.
Yesterday’s rally broke Twitter stock out of the wedge-pattern consolidation (two black lines) and also marginally broke it out of the blue box on a daily closing basis. This here too is very constructive price action.
While traders could look to buy the stock from a swing trading perspective, more risk averse traders could look to set up an income trade.
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Directionally, TWTR stock now has a next upside target near $40, although I do not expect that price target to be reached in a straight line. A stop loss from a swing trading perspective could be set on a drop and hold below the $31 area. Keep in mind however that as I laid out above, I think at this juncture Twitter stock is better to be held than to be traded in an overly active manner.
Check out Anthony Mirhaydari’s Daily Market Outlook for March 6.
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