Twitter, Inc. (TWTR) shares rose more than 8% on Monday morning after a Bloomberg report that an activist investor may have acquired a $1 billion stake to oust CEO Jack Dorsey. Elliott Management has nominated four directors to Twitter's board of directors after having approached executives privately and holding constructive discussions. With only a single class of stock, the company is more vulnerable to activism than other tech companies that have consolidated voting power with different classes of stock.
Several analysts believe that the activist investor's involvement could be a bullish catalyst for Twitter stock. Evercore ISI's Kevin Rippey upgraded Twitter stock from Underperform to In Line, saying that the move could increase the likelihood of a sale. Bernstein's Mark Shmulik added that Twitter stock could continue to rise as more details are disclosed.
From a technical standpoint, Twitter stock rose to its 200-day moving average at $36.34 following the news. The relative strength index (RSI) remains near neutral levels of 53.23, but the moving average convergence divergence (MACD) remains bearish. These indicators suggest that the stock has more room for upside ahead, but the trend remain bearish over the intermediate term.
Traders should watch for a durable breakout from the 200-day moving average over the coming sessions for signs of a trend reversal. If that occurs, traders could see a move to reaction highs of $39.00. If the stock fails to break out, traders could see some consolidation between the 50- and 200-day moving averages. A breakdown from the 50-day moving average could lead to a retest of reaction lows near $31.50.
The author holds no position in the stock(s) mentioned except through passively managed index funds.