This Chart Shows Where Twitter Stock Is Going Next
TWTR Stock: Targeting New Lows
Twitter Inc (NYSE:TWTR) reported earnings on February 9, 2017, and although there were some enthusiastic metrics that are showing growth, revenue is still the largest concern. That report highlighted that Twitter has now reported its 10th consecutive quarter of slower revenue growth, and given that it has only been public for 13 quarters, this trend is a serious concern.
In the two trading sessions following the announcement, TWTR stock lost 16.7% as investors were not shy about showing their displeasure at the earnings. And really, who can blame them?
In my previous publication, titled “Twitter Inc : TWTR Stock Chart Suggests More Pain,” I outlined that the price action on the Twitter stock chart was suggesting that lower prices were a likely outcome, an outcome that would most likely see TWTR stock create a new all-time low.
My opinions and views are generated using technical analysis, and this method of investment analysis is predicated on the notion that historical price and volume data can be used to discern trends and forecast future prices. I have been perfecting my craft using this method for nearly two decades and have become fairly proficient over this time.
The following Twitter stock chart illustrates the price action that suggested lower prices were a likely outcome.
Chart courtesy of StockCharts.com
The price action on the Twitter stock chart above illustrates that the predominant intermediate trend has been to the downside since TWTR stock peaked in early October.
This trend can be identified by the structure of the waves that encompass it. This structure consists of an impulse wave that causes a decline in price, followed by a consolidation wave that serves to alleviate any oversold conditions and set up the next impulse wave lower.
I mentioned in my previous publication that I specifically look for consolidation patterns because they are especially constructive. These waves are the basis of my trading strategies because they not only define the next direction in price, but they also provide a potential price objective.
The theory surrounding this wave structure states that impulse waves that are separated by a consolidation wave tend to mirror each other in terms of length. Applying this to the chart above projects a potential price objective of $10.00, which coincided with a new all-time low for Twitter stock. The weakness that followed the earnings report only supports the notion that this target can be attained.
The following Twitter stock chart illustrates a trend that has been bearish for quite some time and a momentum indicator that supports the notion of lower prices.
Chart courtesy of StockCharts.com
Other than the first few months of trading, it is difficult to argue that a bullish trend ever existed in Twitter stock, and the stock chart above illustrates this notion.
A very large descending channel has defined this bearish trend in TWTR stock. This bearish trend is defined by two parallel downward-sloping trend lines that serve to define support and resistance. As long as the stock remains within the confines of these trend lines, the long-term trend will remain bearish, and lower Twitter stock prices can be expected.
The moving average divergence/convergence (MACD) indicator turned bearish in November 2016. The MACD is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish momentum signals. A bearish MACD cross supports the notion of lower prices, because it suggests that the bears are in full control of the stock, and therefore the path of least resistance is towards lower prices.
The following Twitter stock chart reaffirms the notion that lower prices are set to prevail as bearish signals continue to mount.
Chart courtesy of StockCharts.com
The sell-off after earnings served to support the notion that lower prices are set to prevail. The notion was reinforced when TWTR stock generated a “death cross.” A death cross is a bearish indicator that is produced when the 50-day simple moving average (SMA) crosses below the 200-day SMA.
This signal is used to confirm a bear market is on the horizon, and this doesn’t bode well for those expecting higher Twitter stock prices. It is not uncommon for price to accelerate in the direction of the predominant trend after such a signal is generated.
Bottom Line On Twitter Stock
I am bearish on Twitter stock, because the indicators that are generated using the stock chart support this notion. I will continue to be bearish on TWTR stock, and expect lower prices, until the stock chart gives me reason believe otherwise.
