Twitter (NYSE:TWTR) experienced the narrowest of victories Monday, but smart investors would be wise to give credit where credit is due both off and on the price chart. And now is an ideal time to put Twitter stock back on your buy radar.
Let me explain.
As most successful traders are well aware of, leadership in the market isn’t a constant. Big names like Twitter stock go in and out of favor with Wall Street for a myriad of reasons. And unlike other large cap tech stocks, such as social media peer Facebook (NASDAQ:FB), the big picture is suddenly looking very favorable for investors to revisit TWTR stock as a purchase in the coming days.
Monday’s win for Twitter stock wasn’t much on an absolute basis. But as the broader market racked up an impressive bearish U-turn marked by triple-digit losses to kick off the trading week, Twitter did manage to eke out a gain of 3 cents. Not bad, but it’s probably not worth writing home about in of itself.
What makes Monday’s resiliency all the more impressive is TWTR’s big picture off and on the price chart. The price action follows last week’s impressive 15% stock spike in Twitter shares prompted by a solid Q3 profit and sales beat and management offering a strong vision for making Twitter great again, which, respectfully, investors are buying hook, line and sinker.
Bottom, top and squiggly price line, it’s still not perfect off or on the price Twitter price chart. Yet for this strategist the combination is compelling enough to warrant putting TWTR stock on the buy watch list.
Twitter Stock Price Chart
As the daily price chart shows, Twitter stock is in a downtrend and it is not without its imperfections. Shares have established a series of lower highs, which began after a bearish island top formed in the immediate aftermath of the company’s Q2 report in late July. But technically, that’s not all the bears enjoy either.
Since reporting earnings TWTR stock has been halted at 200-day simple moving average resistance and a bearish-sloping price line, which was conceived after factoring out the earnings gap. In this strategist’s view, the technical situation coupled with an overbought stochastics set-up presents a viable short opportunity against resistance. Nevertheless, it’s not one I’m in favor of playing.
In the realm of imperfect price information and appreciating that there’s always a (technical) line somewhere on the Twitter stock chart that will frustrate bulls or bears, I see the current technical situation as favoring the former camp. Twitter’s post-earnings reaction hints of a powerful new bullish trend emerging on the heels of Twitter stock’s slightly larger-than-average 41% corrective move. What I’m looking for now is confirmation of this new bullish trend and without giving up to much upside in an uncertain broader market.
How to Trade TWTR Stock Today
Specifically, our plan of attack would be to put TWTR on the radar and go long shares on a move above $34. That’s narrowly above Monday’s and last Thursday’s highs, but would be enough to confirm a breakout of the technical resistance described above. If triggered, I’d recommend using the three-day low as a stop-loss.
By waiting for $34 to be penetrated, traders can expect a better chance of success. The move through this key price level is anticipated to help fuel fresh upside momentum in TWTR stock from bullish buyers, as well as some of Twitter’s 6% short interest covering their losses. In turn, the breakout should lead to a quick test of Q2’s bearish price gap from roughly $37.50 – $42.25 and big profits for positioned bulls.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
