Monday, June 9, 2014

Watch Twitter for a break above 35 soon

I've been jumping in and out of TWTR which looks to have made a major bottom after a sharp capitulation at the beginning of May.  Currently, TWTR is down about 50% from where it was at Christmas, after soaring to 75 from the 40 region shortly after its debut on Wall St.  Regardless of any of the Bull/Bear arguments you can make, from a TRADING standpoint, this looks like a low risk/ high reward situation, which is exactly what we are always looking for.  Below is a cup and handle formation being made on the 30 min chart .

We can see a series of higher lows, MA's crossing over, MACD crossing over and staying above the zero line.  These are all conditions that have changed in  TWTR over the last few weeks.  They are conditions typical of a bull move.  From this we are getting the indication things are going to begin to move higher.  From here now, we must look at the most important indicator of all; Price.  If price manages to get above the 35 level its been capped at, what that says is that people who were sellers of TWTR at 35 now believe it is a good price to buy it at, and we can be pretty certain a rally is underway.  That is what support and resistance are, they aren't just lines on a chart with some chicken bones and voodoo.  It's psychology visualized.  If people have been buying a stock repeatedly at 28 every time it hits it,  you will see multiple bottoms on a chart that are forming support at 28.  People think its a good deal at that price.  If a few days later, price falls below 28, what its saying is no one is willing to step up at that price anymore.  Something changed, doesn't matter what for these purposes.  It just means if your long, get out.  It could always be a false break and things rally right back.  If that's the case, it only takes a second to buy it back.  So you missed out on a little bit of profit, but you had peace of mind, and that's far more important.

Here is an hourly chart of TWTR zoomed out to show the more long term picture.  We can see major resistance doesn't show up till about 40, which is 6 points higher than where we are now.  We can see more resistance at 44, 48 and 50, and there is nothing to say it couldn't get there, but even the conservative target looks pretty nice.  We can see we recently found support at 32 at the lows of the "cup".  We can use that as our stop.  Follow the rules, wait for the 10 day EMA to cross the 20.  Look to MACD for confirmation.  Be sure it is trending higher and above the zero line.  Don't be too eager to sell!!  If we hit 40 and things are still going well, STAY!  Wait to see it stop going up first, then look to the MA's for signals.  We might get to 48, and you could short change yourself 8 points.  If this is going to move, it will likely make it's strike in the next few days so watch carefully. 

-Jonathan M Mergott

No comments:

Post a Comment