When Twitter Stock Becomes a Buy

In recent days Twitter (NYSE:TWTR) has become increasingly political and unstable by some counts. But for investors could today’s political theater be stuffing the ballot box in favor of the bulls? Let’s take a look at the circumstances of Twitter stock off and on the price chart, then offer a risk-adjusted determination aligned with those findings.

Twitter (TWTR) app being shown on a phone screen held in a person's hand.
Source: Worawee Meepian / Shutterstock.com

Up until a few days ago Twitter was the social media mouthpiece of our soon-to-be kicking, screaming, departing and now, once again, impeached President. But enough about politics. The question is, did Twitter under its own Commander in Chief Jack Dorsey go to far in permanently banning POTUS? Some will argue the point, but Jack will say differently. And now he has.

In today’s trending news Jack has gone on record in his first public statement defending the company’s actions. In 144 words or less the Twitter CEO wrote, “I do not celebrate or feel pride in our having to ban @realDonaldTrump from Twitter, or how we got here. After a clear warning we’d take this action, we made a decision with the best information we had based on threats to physical safety both on and off Twitter. Was this correct?”

Responding to the tens of thousands “likes” and “retweets” Jack went on to say, “Having to take these actions fragment the public conversation. They divide us. They limit the potential for clarification, redemption, and learnings. And sets a precedent I feel is dangerous: the power of an individual or corporation has over a part of the global public conversation.”

Lastly or rather, somewhere wedged in-between, Jack wrote, “I believe this was the right decision for Twitter” and Twitter’s goal “is to disarm as much as we can, and ensure we are all building towards a greater common understanding, and a more peaceful existence on earth.” It sounds so level-headed. But what’s with that beard?

Twitter Stock Weekly Price Chart

Twitter (TWTR) monthly chart testing position versus bearish reversal


Source: Charts by TradingView

I wouldn’t disrespect investors that helped crash Twitter stock this week. Shares were up 69% in 2020 and 170% above its Covid-19 March bottom. There’s profits on the table as part of those rallies to be certain. But today’s political theater surrounding shares is likely to pass. And in our estimation that should lead to a longer-term opportunity for its shareholders.

Currently the provided monthly price chart reveals a confirmed topping or reversal pattern formed with December’s and January’s candlesticks. TWTR shares are also overbought and show a bearish stochastics crossing pattern. That’s the bad news or more aptly the grounds for not buying the stock today.

The good news is Twitter has moved into a key testing position where buying on the pullback could result in a big payoff.

Shares are now positioned at TWTR’s recent breakout from a bullish two-year long double-bottom pattern formed against the stock’s lifetime 50% retracement level. A failure by bears to close the deal, i.e., follow-through beneath this week’s low of $45.15, would hint at the resolve of bulls. Should that play out a rally to new relative and even all-time highs could be possible in 2021.

I’d suggest waiting on a weekly stock confirmation before taking any long exposure in Twitter. At the moment this week’s fallout is taking the shape of a doji decision candle. Stochastics on this time frame are also inside neutral territory, but still pointing bearishly lower. This could all change rapidly for the better by next week.

Bottom-line, as early as next Monday, a bullish doji confirmation or similar two-candlestick bottoming signal and a flattened stochastics in tow should be monitored for opening up a long position in Twitter stock. The monthly chart will have added support to eventually affirm the bullish weekly bottom. And to better position for that kind of resolution, I’d suggest #stockcollar as an always popular strategy and hopefully a bullishly-trending Twitter stock in the days to follow.

Investment accounts under Christopher Tyler’s do not hold 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 market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


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