Twitter, Inc. (TWTR) is trading higher in Tuesday's pre-market after beating first quarter earnings per share (EPS) estimates by 22 cents and exceeding revenue expectations by 1.5% at $787 million. Average monetizable daily active users (mDAUs) came in at 134 million vs. 120 million a year ago and 321 million in the prior quarter. The company reiterated second quarter guidance, now expecting $770 million to $830 million in revenues compared to the consensus of $818 million.
The stock jumped more than 10% after the bullish metrics and pulled back, settling near the 7% level ahead of the opening bell. The retreat places price action just below resistance at the December high above $37, which marks the key level to watch during the regular session. A quick breakout might not be in cards because that peak also marks resistance at the bottom of July 2018's unfilled gap between $43 and $37.50.
TWTR Long-Term Chart (2013 – 2019)
The company came public to great fanfare at $45.10 in November 2013, rallying to $50.09 before aggressive sellers dumped the stock back to the opening print at the closing bell. It settled in the upper $30s into December and took off in a vertical trend advance that posted an all-time high at $74.73 just three weeks later. A reversal in the following session marked the first wave of a multi-year downtrend that broke through the post-IPO low in May 2014.
Committed buyers emerged in the low $30s a few weeks later, generating a bounce that continued into October's lower high in the mid-$50s. It pulled back into the upper $30s in January 2015 and turned higher once again, stalling within two points of the 2015 high. The subsequent decline broke January support in August, initiating an aggressive selling wave that ended in the mid-teens in February 2016.
A bounce into March printed a lower high, while a sell-off into June hit an all-time low at $13.73, ahead of a rapid 100% uptick triggered by take-over speculation. Talks failed, yielding a final downdraft that found support above the May low while ending the downtrend with a triple bottom reversal. The stock surged to a three-year high in June 2018, stalling just two points above the IPO's opening print, and has been consolidating in a 21-point range for the past 10 months.
The monthly stochastics oscillator is engaged in a full-blown buy cycle, offering a stiff tailwind for buyers after the earnings news. The rally into June 2018 reversed at the 50% retracement of the three-year downtrend, while the bounce since October has reached the 50% retracement of the four-month downtrend. The longer-term .382 retracement level above $43 marks major resistance in this price structure, which makes sense because a rally into that level will also fill the July 2018 gap. As a result, it marks a logical profit target for the current uptick.
TWTR Short-Term Chart (2017 – 2019)
The on-balance volume (OBV) accumulation-distribution indicator posted a new high in June 2018 and entered a modest distribution wave that ended nearly three months before the selloff bottomed out in October. It broke out to an all-time high in April 2019, signaling impressive institutional sponsorship after years of apathy and mistrust. Given this backdrop, the stock could easily rally back to the 2018 high in the coming months.
However, the big gap (red lines) requires a cautious approach unless filled in one or two sessions because the price zone is filled with trapped shareholders looking to get out. That adds urgency to this week's price action, which should offer key insight about current buying demand. An opening tick within the gap, rather than at resistance, might offer an early buying signal, while aggressive sellers could reload short positions if the stock fails to hold $37.00 to $37.50.
The Bottom Line
Twitter stock rallied to a 2019 high in Tuesday's pre-market after beating first quarter estimates and will likely test the July 2018 gap after the opening bell.
Disclosure: The author held no positions in aforementioned securities at the time of publication.