Twitter, Inc. (TWTR) shares rose more than 10% during Monday's session before giving up ground on a broad market open lower on Tuesday. Over the past year, Twitter stock is trading up nearly 50% after its sharp decline in 2015 and sideways movement in 2016. The company has beat earnings estimates every quarter this year, but revenue continues to decline, and the social media platform has struggled to find its place in the ecosystem.
JPMorgan upgraded Twitter from Hold to Overweight and raised its price target to $27.00, which represents a roughly 24% premium to the current market price. Analyst Doug Anmuth believes that Twitter will improve its video and live streaming platform, grow daily active users by 10%, grow ad revenue by 8% and reach GAAP profitability in 2018. While acknowledging that shares aren't cheap at current levels, he believes that user and ad traction will create upside. (See also: Twitter to Return to Revenue Growth in 2018: JPMorgan.)
From a technical standpoint, the stock broke out from upper trendline resistance at around $23.00 and R2 resistance at around $23.99 to its highest levels this year. The relative strength index (RSI) moved into overbought levels with a reading of 70.29, while the moving average convergence divergence (MACD) rebounded into bullish territory. Traders should maintain a bullish bias on the stock but keep in mind that there may be some near-term consolidation.
In particular, traders should watch for consolidation above R2 support or trendline support between $23.00 and $24.00 given the lofty RSI reading. A breakdown from these levels could lead to the pivot point and 50-day moving average at around $20.31, but the favorable momentum means that investors will likely see a rebound following some consolidation. The next major resistance is highs made in October 2016 of around $26.00. (For more, see: Twitter Stock: Breakout or Double Top?)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.