Shares of Twitter Inc (NYSE:TWTR) pumped higher to the tune of 11.4% on the back of an analyst upgrade from Morgan Stanley on April 17. The rally in TWTR stock likely caught some near-term bearish traders by surprise, forcing them to cover shorts. Furthermore, Tuesday’s move confirmed that the bigger-picture bullish thesis I have been discussing around this stock for the past seven months remains intact.
So you know, Twitter is scheduled to report its next batch of earnings in one week from today, on April 25. As always, I am not a fan of “gambling” with swing trades by holding them through earnings reports. However, keeping a medium-to-longer-term long position in TWTR through earnings at this juncture makes sense to me.
When I last discussed Twitter stock in this here column on March 6, I offered a small swing trade to the upside that we ended up getting stopped out on. However, the more prominent message I offered that day is that “…at this juncture Twitter stock is better to be held than to be traded in an overly active manner.” I remain of this opinion, which we will now put some perspective around with the help of the below charts.
Twitter Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear weekly chart, we see that although TWTR stock had a dismal time in 2014 and 2015, by 2016 it no longer had any meaningful downside momentum as sellers became exhausted This continued through 2017 as the stock traced out a well-defined so-called bottoming or basing pattern.
Following the February 2018 earnings report, the stock rallied sharply and thus at once also broke out of this two-year basing period. The broader market choppiness and concerns around some social media stocks in March also put selling pressure on TWTR stock, which then re-tested its red 200 week simple moving average and roughly also its breakout point from February.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that the thus-far April lows in TWTR stock also coincided with horizontal support as well as the blue 100-day simple moving average. Also note that the pull-back in March managed to fill the entire up-gap from the February earnings report. This, all else being equal is healthy backing and filling through the lens of technical analysis.
Lastly, the rally on Tuesday helped confirm the aforementioned technical support levels and that the February breakout as well as the 2016-2017 basing period is still to be trusted.
While I don’t suggest making any immediate gratification swing trading bets on this stock through its earnings report next week, I do think the picture remains solid to hold the stock for a move into the high $30’s for the time being.
Check out Anthony Mirhaydari’s Daily Market Outlook for April 18.
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