Twitter Inc: Price Objectives for a Possible TWTR Stock Buyout
TWTR Stock: For Sale
Twitter Inc (NYSE:TWTR) is up for sale, and a number of potential suitors are now lining up to take a stab at an acquisition.
Names that have been swirling around are salesforce.com, inc. (NYSE:CRM), Alphabet Inc (NASDAQ:GOOG), Walt Disney Co (NYSE:DIS), and now Microsoft Corporation (NASDAQ:MSFT). These suitors are lining up, but nothing in terms of a bid has yet to develop. This has left many traders speculating about the potential price that an acquirer might pay to engulf a company like Twitter.
I use price charts as my main tool to set trading strategies, and the best strategies require a price objective. If I apply this same logic to a potential TWTR stock buyout price, then perhaps I will be able to see if there is any value in the current price of the stock. The actual price that is paid for TWTR stock will obviously differ from the prices that I present, but we must understand that investors will need to vote and agree on the buyout price, so there may be some merit to this procedure.
My premise is based on the notion that if my minimum price objective for a stock has value, there is still money left on the table for traders like myself to capitalize upon.
The following Twitter stock chart illustrates the reversal pattern that was confirmed the week of September 23, 2016.
Chart courtesy of StockCharts.com
The TWTR stock chart above illustrates the predominant pattern that I was looking for to confirm a bottom and a trend reversal. The pattern is known as a double bottom. A double bottom is a reversal pattern that appears at the end of a trend. It is marked by two consecutive bottoms, separated by a peak in-between. The pattern is confirmed when shares close above the peak that separates the two bottoms.
Double bottom patterns are also of great benefit because not only do they signal a change in a trend, but they also produce a possible price objective. This reversal pattern projects a potential target of $26.00 on TWTR stock.
The following Twitter stock chart illustrates other price objectives using a longer time horizon.
Chart courtesy of StockCharts.com
The chart above illustrates multiple levels of resistance, but the dominant level that I am watching is defined by the downtrend line highlighted in blue. This trend line, effectively defines the bear market in TWTR stock. The price could rise to $35.00 today and this would constitute a rally within a predominant downtrending bear market.
The lines highlighted in green represent the previous level of support and resistance that served for a minimal amount of time and would cause some congestion if Twitter stock prices were to move back through that area.
This chart provides $30.00-$35.00 as possible a price target for TWTR stock.
The following Twitter stock chart uses technical tools to find hidden levels of congestion and resistance.
Chart courtesy of StockCharts.com
Fibonacci retracement numbers (highlighted in purple) are a very popular tool used by many technical traders. This tool is used to identify countertrend price objectives. In theory, when a stock pulls back from a primary trend, shares will retrace approximately 50%-62% of the primary move. This zone usually offers resistance as traders will be eyeing this as an area to exit long positions (or enter new short positions). So for arguments sake, I will use $43.50 as a potential price target.
The scaling on the left side of the chart is volume by price and it illustrates where the predominant amount of volume occurred, and at which price. Aside from the bottom, where more volume is expected given the low share price, the area marked between $35.00-$40.00 is the next largest area, where the most amount of shares traded hands. There are many investors who bought at those prevailing prices who are underwater and would love to be made whole again.
Could this be the buyout price catalyst? Possibly.
The Bottom Line on Twitter Stock
There are many price objectives for Twitter stock that are potentially in play and all offer value. My favorite is the measured run off the double bottom, which has the most conservative price target of $26.00. This level still offers an attractive return given the current trading price and gives me reason to be bullish on TWTR stock.
