Historical trading patterns suggest a bargain for Twitter, Inc. (NYSE:TWTR) stock is just around the corner

Historical trading patterns suggest a bargain for Twitter, Inc. (NYSE:TWTR) stock is just around the corner

Historical trading patterns suggest a bargain for Twitter, Inc. (NYSE:TWTR) stock is just around the corner

The past two months have been exact opposites for Twitter (NYSE:TWTR). In April, Twitter stock gained 21% on the month, five times the performance of the S&P 500. Fast forward to May, and it’s down nearly 5% for the month.

Two opposite monthly performances likely have investors wondering if the Twitter stock price is headed to either $30 or $40 in June.

I don’t have a crystal ball. All I can say is if it does drop below $30, it’s a screaming buy. Here’s why.

A Lot Has Changed in the Past Year for TWTR Stock

Last August, I wrote an article about Mark Cuban selling his Twitter stock and what that meant for other stakeholders.

Cuban exiting had very little to do with TWTR stock itself. Instead, he preferred moving more of his equity investments to cash. Given what happened to equities in the final three months of 2018, it wasn’t a dumb move.

As for Twitter, I made a case for and against holding onto its stock.

The argument for holding shares came down to the fact it was delivering profitable quarters and growing free cash flow. Those were two criteria I felt were necessary if TWTR stock ever wanted to see $70 again.

The argument against exposure had everything to do with its declining user base. At the time, TWTR had just released its second-quarter 2018 earnings results that saw its monthly active users drop by a million on a sequential basis. The news knocked 20% off the Twitter stock price.

On August 14, 2018, shares were trading around $33. I finished off my article by suggesting that below $30, TWTR stock was a bargain. I wrote:

“Now that it’s producing consistent profits, I believe the company can make more money by better engaging its users rather than focusing on trying to keep growing its user base. Eventually, the fact that real people are benefiting from using the platform will renew its user growth.”

I emphasized my bullishness, stating “Below $30, Twitter is a bargain. If you already own it, I wouldn’t sell; instead, I would wait for an entry point below $30 to buy some more.”

Since that article, the Twitter stock price has dropped below $30 on two occasions. The first occurred in October and the second in December. Having gone on a run in 2019, TWTR is up over 32% year-to-date.

However, it’s been on a downhill slide since early May.

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

The projected upper bound is: 40.36.

The projected lower bound is: 34.46.

The projected closing price is: 37.41.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 25 white candles and 25 black candles.

An inverted hammer occurred. If this occurs during a downtrend (which appears to be the case with TWITTER INC) it implies a reversal. Look for a confirmation of the reversal on the bar.

A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).

A shooting star occurred (a shooting star has a small real body near the bottom of the candle and a long upper shadow). During an uptrend the long upper shadow indicates that the bears are gaining control and a top may occur.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 19.7090. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 8 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 49.34. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 14 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -33. This is not a topping or bottoming area. The last signal was a buy 8 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 13 period(s) ago.

Rex Takasugi – TD Profile

TWITTER INC closed down -0.120 at 37.290. Volume was 19% below average (neutral) and Bollinger Bands were 12% narrower than normal.

Open High Low Close Volume___
37.410 38.030 37.240 37.290 2,696,883

Technical Outlook
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 37.57 36.08 32.67
Volatility: 37 51 59
Volume: 2,586,165 3,160,129 3,952,468

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

TWITTER INC is currently 14.2% above its 200-period moving average and is in an downward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of TWTR.N at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on TWTR.N and have had this outlook for the last 6 periods.

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