Chart of the Day: Trading Twitter's Back-To-Back Bullish Patterns
Investing.com | Apr 22, 2019 10:01AM ET
Twitter (NYSE:TWTR), U.S. President Donald Trump's social media platform of choice, is slated to report earnings on Tuesday, April 23, before the market opens. Consensus expectations are for an EPS of $0.15, slightly lower than the $0.16 posted for the same quarter last year, on revenues of $774.32 million—significantly higher than the $665 million brought in last year during the corresponding quarter.
For the past 20 quarters, the company met EPS expectations once, and beat them the remaining 19 times. During the same period, Twitter missed four times on revenue.
Since the stock's $26.19 December low, Twitter shares have gained more than 30%. The stock closed at $34.40 ahead of the weekend. Technical analysis signals shares could be headed higher.
Chart powered by TradingView
The price has been congesting since April 10 in the form of a pennant, bullish after the $3.44, or 10.77% jump in the 9 sessions between March 28 and April 9, a conservative measure for the patterns’ target from the point of breakout.
If the pattern completes—with an upside breakout, demonstrating that demand absorbed all the local supply and is willing to go higher to find amenable sellers—it will set up the completion of a much larger, complex H&S bottom, in effect since Jul. 2008. That target, measured by the height of the H&S, is over $10 from the neckline’s upward penetration.
Another example of how various technical forces come together: that target would coincide with the expected resistance of the congestion of June-July 2018.
h2 Trading Strategies/h2Conservative traders would wait for an upside breakout of the H&S, as its neckline is a potential resistance in the upside breakout of the pennant.
Moderate traders are likely to wait for an upside breakout that would scale above the Apr. 9 high of $35.39, the highest point of the pennant, which confirmed the resistance of the Feb. 6 high, followed by a return-move to retest the pattern’s integrity, with at least one long green candle engulfing a red or small candle of either color.
Aggressive traders may go long now, relying on the support of the pennant’s bottom, provided they are able to withstand unexpected losses following any earnings disappointments, which may send Twitter shares tumbling below a stop-loss amid slippage.
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Trade Sample
- Entry: $34.30
- Stop-Loss: $33.80
- Risk: $0.5
- Target: $35.80
- Reward: $1.50
- Risk-Reward Ratio: 1:3
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