Is Twitter Heading Towards A Rounding Bottom Pattern Formation?
Felipe Potes | Sep 07, 2019 06:08PM ET
If you're a Technical Analysis hound, then you're probably into searching for stock patterns all over the market. If you're not, you might as well look into it because stock chart patterns tend to repeat themselves over and over again. They're always present in our trading psychology and if you're able to identify and jump into them early, then you'll probably get some part of the action.
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In this opportunity I will put on the table a possible Rounding Bottom Pattern Formation building up on Twitter (NYSE:TWTR). Just to make sure that we're all on the same page, let's take a look at what this chart pattern looks like:
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This pattern is primarily identified by a "U" formation of price movements signaling the end of a downwards trend, to later on head towards a trend reversal in the long-run.
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Let's take a look now at Twitter's Monthly Chart. See the resemblance?
The stock is way above it's low's seen in 2016-2017 of around $15 and currently working it's way up towards $51 which is the key level for a breakout and trend reversal to occur, and therefor complete the Rounding Bottom Pattern Formation.
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Twitter has had an outstanding 2019 performance pulling a +58% YTD outpacing the S&P 500 which is at 18.8% in the same time frame.
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As far as valuation is concerned, Twitter has a Forward P/E ratio of 18.44 right now, representing a discount compared to it's industry's average Forward P/E ratio which stands at 51.34. Twitter also holds a PEG ratio of 0.78. This ratio is important because it takes into consideration the company's expected earnings growth rate. The Industry-Software industry holds a PEG ratio of 2.84.
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Speaking of earnings, Twitter is expected to report Q3 results by late October. Consensus estimates expect an EPS of $0.19 per share and revenue of $873.7 million. For the full year, consensus estimates expect an EPS of $2.46 per share and $3.56 billion in revenue. This would represent a variation of 186.05% and 17.06% respectively from last year.
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