Twitter (NYSE:TWTR) stock has delivered a concise, loud and clear message to investors. If you weren’t already bullish, it’s an even better environment to monetize your trading account by going long Twitter stock today. Let me explain.
This past Friday was rightfully a very solid day for TWTR stock. Shares jumped higher, finishing up nearly 9% and the stock’s highest levels since last July following its Q2 earnings confessional. And if you think the reaction in Twitter stock is overdone, that’s fake news only being voiced by bears on the wrong side of the action.
By the numbers, Twitter stock delivered a penny earnings beat on profits of 20 cents per share. Sales of $841 million grew by 18% and topped forecasts of $829, while average monetizable daily active users (mDAUs) of 139 million increased 14% year-over-year. Nice, right?
On call CFO Ned Segal also stated, “We feel like our messages of launching new products and services and connecting what’s happening continues to really resonate with advertisers.” If it all sounds good, as it should, it is. What’s more, conditions are also resonating strongly on the price chart with bulls in Twitter stock.
Twitter Stock Weekly Chart
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The past year hasn’t always been easy for Twitter bulls. Increasingly though, the price action has been both productive and constructive. Shares are up 38% in 2019. And if TWTR’s large base has any say in matters, the back-half of the year also looks poised for much stronger gains in Twitter stock.
Technically, Friday’s bid in TWTR put shares into the upper third of a one-year long corrective base-building phase. It’s decidedly bullish-looking and a far cry from conditions earlier this year. For several months after hitting a relative high in July 2018, Twitter stock hinted strongly at lower prices as a continuation head and shoulders pattern emerged. Bottom-line though, the bearish formation failed and the bull case has continued to steadily build.
Following the bearish pattern’s failure in April when shares rallied decisively through the right shoulder, Twitter has confirmed a fully-developed uptrend within the base courtesy of Friday’s higher high price action. Coupled with a supportive-looking stochastics set-up, our interpretation is Twitter stock will find bullish momentum traveling along the Bollinger indicator’s upper band and continue rallying aggressively from current levels.
The Twitter Stock Trade
For Twitter stock investors open to buying shares today, the next logical challenge will be the relative high set in July 2018. That’s a bit more than $6 of upside before taking partial profits makes practical sense. Optimistically though, anticipating a breakout of the base to fresh relative highs and even greater returns looks appropriate in today’s environment.
As noted above, patterns have been known to fail. As such, initially I’d look to exit Twitter stock if shares drop 1% below the base’s 62% retracement level, which was broken Friday. Setting a stop beneath $39.15 amounts to dollar exposure of about $2.35 and a very solid ratio of nearly 3:1, wherein the reward clearly outweighs the risk, which strongly favors a long position in TWTR today.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in Twitter (TWTR) stock or its derivatives or any other 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, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.
