You might have thought we “sold in May and walked away.” Not so as it doesn’t make for a great investment strategy. Sometimes, the market calls for patience and diligence. Other times, it calls for action and execution. Which brings us to today’s findings. One of the more battered stocks of the past two years has been Twitter (TWTR). Losing 80% during that timeframe, many have written it off as an also-ran in the growing social media landscape. In an industry dominated by Facebook, LinkedIn, and Snapchat, Twitter has been a mess since its IPO surge in late 2013. The carnage was so tremendous that we had to grab this screen shot of Twitter news headlines back on April 27th, 2016, right after their earnings release. We added the quotes in red.
As you know, we don’t invest based on hope, gossip, rumors, or opinions. We invest by studying the most important data point of all: price. When it becomes apparent that the herd is all headed in one direction, we take notice and are ready to act when the most important data point shows us a low risk / high reward entry point. The herd can stay on the right side of the trade for longer than you think… until it doesn’t. Price shows us logical areas where the herd either becomes exhausted or changes direction rapidly.
Below is a weekly chart of TWTR dating back to its IPO in late 2013. It’s easy to see the dramatic decline. It’s also easy to see that momentum has been diverging from price (annotated in purple) since the beginning of 2016. We like that. In addition, TWTR appears to be breaking out from a year long downtrend. We like that too.
Looking closer at the daily chart, we can see momentum and price divergence in this time frame as well. Throw in the fact that price likes to fill in gaps (such as the one created back on April 27th), we like this set-up. Low risk. High reward.
A quick move to $17 could materialize, and possibly more if this is a substantial breakout. Below 14.45, and we’re wrong. Above 14.45, we like it. Below that level, and we’ll give it back to the herd.
By the way, if you want to receive real time updates regarding this Twitter analysis, you can follow us on (you guessed it) Twitter! Right here: @360Research
Disclaimer: Nothing in this article should be construed as investment advice or a solicitation to buy or sell a security. You invest based on your own decisions.