Tuesday, January 6, 2015

TWTR Twitter Weekly Chart Sideways Symmetrical Triangle

Twitter catapults +6% higher in a down tape today. There are three news events providing a boost. First, there is chatter that CEO Dick Costolo will be given the boot and traders appear to like this idea. Second, analysts are suggesting that YHOO should buy TWTR. Third, there are rumors that activist investor Carl Icahn is buying stock and call options in Twitter. So traders are tripping over each other to buy the long side in the tweety bird.

The daily chart shows clear positive divergence that creates the bounce today and would like to see further upside perhaps to the gap at 44-48. Note that the 44 resistance level from the daily chart matches up with the top blue trend line on the weekly chart above. The blue lines on the weekly chart show a sideways symmetrical triangle pattern and this is reinforced by sideways indicators and sideways moving averages. The pink box shows the ADX dead sideways as well showing the absence of any trend, hence sideways. Price is going to either break up and out of the triangle or collapse out the bottom and the ADX is going to move up into the pink box in the right margin and verify that the directional move (whichever way it is) is a strong trend. So watch that in the future.

Note that the triangle continues out to about April-May so there is another three months that may play out as price moves sideways within the triangle pattern deciding which way to break. If you are a nimble and experienced trader, the upside play has potential now to 44 where the short side may be the next play from 44 back down to 37-40 and then in Feb-April Twitter will likely make a firm commitment out of the triangle either up or down. Sideways triangles are interesting in that many times they will provide a fake-out move first and then return to the triangle and go out the other side for the true move. Therefore, if price goes up to 44 and breaks out higher remain cautious of the move. The charts can be reviewed in a couple weeks or a month and will provide a clearer path forward.

If CEO Costolo leaves it will likely not be for a few months but perhaps the apex of the triangle where a decision has to be made up or down for price may coincide with a major decision by Costolo about his future at TWTR in the Feb-May time period. Twitter will be interesting to follow here forward. It is a great service but the company is finding it difficult to create revenue streams. Based on the charts right now, the guess would be up to 44 say in January then back down to 37-40 in February then the decision up or down out of the blue trend lines will occur.

Another important aspect is that the triangle has such a large vertical side to it that the directional decision will likely decide the fate of the entire future of the stock. If it breaks down and fails at 36-38 it may drop to a single-digit midget which will indicate that the engineers simply cannot monetize the company to any great extent. If the breakout is above 44-47, then Twitter will be exalted to greatness to 70-100 and higher and take its rightful place in the pantheon of social internet companies. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added on 1/8/14: TWTR was smacked -4% lower on news that Dick Costolo has sold $25 million in stock over the last couple months. TWTR then recovers +4% on news that the selling only represents 10% of his holdings. Lots of drama continues with Twitter. Price is at 39.09.

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