Twitter (TWTR) at Cusp of Major Breakout

Long-time laggard Twitter, Inc. (TWTR) lifted above 2013's initial public offering (IPO) opening print at $45.10 for the first time since September 2019 last week, setting the stage for a potential breakout that brings the all-time high in the $70s into view. Accumulation has lifted to a new high at the same time, generating a stiff tailwind that could presage superior returns in coming years, including a sustained uptrend into the triple digits.

Key Takeaways

  • Twitter stock has rallied into resistance at the 2013 IPO opening print for the first time since September.
  • A breakout could signal the start of a long period of superior returns.
  • Extraordinary October challenges could delay or forestall a breakout.

Ironically, the uptick has coincided with the Senate Commerce Committee issuing subpoenas to the CEOs of Twitter as well as Facebook, Inc. (FB) and Alphabet Inc. (GOOGL) as part of an ongoing Republican investigation of alleged anti-conservative bias. If re-elected, President Trump and regulatory agencies could come down hard on these politically powerful social media portals, including the removal of substantial tax breaks.

Pivotal Research Group analyst Michael Levine triggered the rally last week when he upgraded Twitter shares from "Hold" to "Buy," highlighting upcoming opportunities in the 2021 Tokyo Olympics, subscription services, and direct response advertising revenue. However, the firm also acknowledged that negative sentiment has weighed on performance more than metrics in recent years and expects a more positive view to emerge going forward.

The rest of Wall Street is less enthusiastic about Twitter's outlook, maintaining a consensus "Hold" rating based upon 6 "Buy," 22 "Hold," and one "Sell" recommendation. Price targets currently range from a low of $30 to a Street-high $60, while the stock is set to open Friday's session about $6 above the median $40 target. More analysts will have to jump on board the buy train for performance to match these mixed numbers in coming months.

Market sentiment refers to the overall attitude of investors toward a particular security or financial market. It is the feeling or tone of a market, or its crowd psychology, as revealed through the activity and price movement of the securities traded in that market. In broad terms, rising prices indicate bullish market sentiment, while falling prices indicate bearish market sentiment.

Twitter Long-Term Chart (2013 – 2020)

Chart showing the share price performance of Twitter, Inc. (TWTR)

The company came public at $45.10 on Nov. 7, 2013, and entered an immediate uptrend that posted an all-time high at $74.73 during the last week of December. The subsequent downturn sliced through the IPO opening print in April 2014 before bottoming out in the upper $20s in May. The stock crisscrossed the print multiple times into the second quarter of 2015 and broke down, descending into the low teens at the start of 2016.

It tested the deep low twice into 2017 and turned sharply higher, lifting to a three-year high at the opening print in June 2018. That level acted as resistance once again, ending the uptick, ahead of broad sideway action that also reversed at resistance in September 2019. The stock broke range support in the mid-$20s during the first quarter's pandemic selloff and reversed, remounting broken support in April and lifting above the 2019 high last week.

The IPO opening print also marks the 50% retracement of the downtrend into 2016, highlighting the need for skeptical buyers to come off the sidelines here and lift the stock into the $50s. The uptick has just eased into a trading range that acknowledges resistance, so a positive catalyst may be needed to trigger a breakout. That could be a tall order in the fourth quarter, given the extraordinary challenges. As a result, there isn't much to do except to wait and watch price action in coming weeks.

A triple bottom is a bullish chart pattern used in technical analysis that is characterized by three equal lows followed by a breakout above the resistance level.

The Bottom Line

Twitter stock has returned to seven-year resistance and could break out in coming months, entering the first sustained uptrend in its public history.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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