TWTR Stock: The Bear Is Alive and Well
In my previous publication on Twitter Inc (NYSE:TWTR) stock, I had outlined the possibility that Donald Trump could be laying the foundation that could make Twitter stock great again, because Trump uses this form of social media to share his ideas daily.
Trump’s actions have been a basis for comic relief in late-night television segments, but I have actually found it a pleasure to be so attuned with the thoughts of the next president of the United States. Unfortunately, this has done nothing to reverse the bearish trading action that has gripped TWTR stock for what now feels like an eternity.
The TWTR stock chart that I use to discern trends and forecast future prices is undoubtedly bearish, and I would even go as far to suggest that it is a picture-perfect example of bearish price action.
The following Twitter stock chart illustrates the recent developments in its price.
Chart courtesy of StockCharts.com
I have been looking for bullish developments in Twitter stock since early September, when a golden cross was generated. 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.
This indicator foresaw the surge in price that developed on the heels of a buyout rumor, but little ever came of these rumors, as all of the potential suitors quickly abandoned any potential bid for the company. This resulted in TWTR stock quickly returning back to the price level that prevailed prior to these rumors.
In my previous publication on Twitter stock, I outlined that the price was contained between the 50-day and 200-day moving averages. Although the price remained above the 200-day moving average, this in itself is bullish. In order for the price to become more constructive, the price needed to close above the 50-day moving average as well.
TWTR stock did manage to break above the 50-day moving average but, just as things began looking a bit brighter, the price began acting poorly, and a bearish price action has effectively muted any further bullish developments.
The following Twitter stock chart illustrates the bearish price action that has reinforced a bearish view.
Chart courtesy of StockCharts.com
Price action can be defined by the type of impulse waves and consolidation waves that make up a trend. Impulse waves take the price to a new level, and the consolidation waves serve to alleviate any overbought or oversold conditions that have developed. The consolidation wave is also where the price sets up the next prevailing impulse wave.
When I am looking to set up a potential trading strategy, I specifically look for consolidation patterns. The ascending channel that is highlighted in purple on the Twitter stock chart above would constitute such a pattern that I would be looking for.
Such patterns are very effective in setting up a strategy because, not only do they define risk, they provide a potential price objective.
The theory behind impulse waves that are separated by a consolidation wave is that the impulse waves tend to mirror each other in terms of length. Using this theory on the TWTR stock chart above, the chart projects a potential price objective of $10.00. This price objective is also suggesting a new all-time low in Twitter stock.
Bottom Line on Twitter Stock
I am bearish on Twitter stock because the price action is now suggesting a price objective at a new all-time low. My views are predicated on the price chart of TWTR stock and, as a result, my bearish view will remain until the price warrants holding a different view.