TWTR Stock: Expecting too Much?
President-elect Donald Trump is an avid tweeter. If you want to know what he is thinking, you can add him to your “Twitter” account; his handle is Donald J. Trump (@realDonaldTrump). This will give you access to his insight, thoughts, and mindset. The man seems to never sleep, as his tweets can come at any time of day or night.
This man may have given Twitter Inc (NYSE:TWTR) and TWTR stock new life, or at least life for the duration of his presidency. His tirade of tweets on Twitter are informative, comical, and inspiring. This is a first among many for the western world.
This man, Donald Trump, is going to be the next president of the United States. There were fears surrounding this outcome, as the media had many of us believing that the equity markets would crash, and chaos would ensue. Fortunately, for everyone’s sake, the exact opposite occurred, as equity markets surged to new all-time highs. Perhaps Donald Trump will make everything great again; perhaps even Twitter stock too.
TWTR stock experienced quite the fallout after the rumors surrounding a buyout quickly fell apart. There were numerous suitors who were lining up to take a chance to bid but, for some some reason, each and every one of them turned tail and ran off. Twitter stock was trading as high as $25.25 before news started swirling that potential bidders were walking away. In a matter of seven trading days, TWTR stock hit a low of $16.28 and effectively erased 35.5% of the company’s market value.
The price of Twitter stock has now settled, and it is off of those lows that were created shortly after the fallout. There is a lot of heavy lifting that needs to occur before the damage that was created on the stock chart can rectify itself. The only solace I have for the bulls is that a few signals remained bullish during this schizophrenic trading environment.
The following Twitter stock chart illustrates where the price currently sits.
Chart courtesy of StockCharts.com
The Twitter stock chart is a complete mess, so it is difficult to make head or tails of it, but let me start by outlining the bullish developments that are still intact.
In early September, TWTR stock generated a golden cross. A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). Traders use this signal to confirm that a bull market is on the horizon. This signal is known to create a bullish tailwind and, as result, bullish patterns have a higher probability of success when this signal is engaged.
Twitter stock is also trading above the 200-day moving average. The 200-day moving average is the dividing line between stocks trading in a bull market versus stocks trading in a bear market. When the share price is above the moving average, it is bullish; when the share price is below the moving average, it is bearish.
The bearish development that needs to be overcome is that Twitter stock has been unable to close the 50-day moving average. Trading beneath the 50-day moving average is deemed unhealthy, and projects weakness. Twitter stock tried to close above this level when the equity markets surged, but not even the Trump rally was enough to accomplish this feat.
The 200- and 50-day moving averages have created a little corridor that TWTR stock is now caught in between. It has a feeling that the price is neither here nor there as it drifts sideways. A catalyst is needed to get TWTR stock out of this channel because, as time progresses, these moving averages will start to converge.
Perhaps the attention that Donald Trump brings to Twitter will be the catalyst that finally gets TWTR stock moving above the 50-day moving average, and back on the growth track.
Bottom Line on Twitter Stock
I am neutral on Twitter stock, as there is very little on the price chart that presents any type of constructive behavior. A first step toward a bullish outcome would be for TWTR stock to close above the 50-day moving average on a sustained basis.