In the spirit of strong objective analysis, we are going to take a close look at Twitter Inc. (NYSE: TWTR) from a technical chartist point of view today.
In short, technical analysis assumes that all publicly available facts about a stock are already discounted by knowledgeable buyers and sellers. And it is from there that the real work begins: examining the stocks behavior on the chart.
As such, we will begin with a quick check of the primary oscillators: the 14-day Relative Strength Indicator (RSI) and the 20-day fast stochastic. Both of these measures report on the degree to which a security is overbought or oversold ie, whether it has gone too far too fast in one direction or the other, and some kind of mean-reversion is called for. In each case, an indicator score of above 75 is considered overbought, while a score under 25 is considered oversold. In the case of Twitter Inc., the 14-day RSI stands at 50.53%, while the past month of action shows a score of 39.24% on the fast stochastic.
Well, what if we now look away from mean-reversion and towards the concept of trend That comprises our next step. To do this, we will start off by examining the most common systematic technical method of determining the direction of long-term trend in a stock: moving averages.
In the most basic sense, we can see that TWTR has recently been exhibiting a bearing on the chart that suggests an overall bullish mode of behavior. This read comes from a look at the relative positioning of the 50-day and 200-day simple moving averages: if the 50-day is trading above the 200-day, momentum is to the upside making a bull case for trend; if the 50-day is trading below the 200-day, momentum is to the downside, making a bear case for trend. In this example, that system makes a bullish case, which naturally implies a positive money flow scenario for the stock.
So, we’ve spent some time looking at price as a factor. But what about volume In fact, many technicians view volume as more important than price. Volume defines the total level of participation involved in a stock. Its a coefficient of meaning that should be metaphorically multiplied times price action to equal conviction. In this case, we want to examine relative volume measures to get a feel for interest in the stock of late. Right now, this stock has been showing weak relative volume, which indicates lack of interest among those making a market for shares of the stock.
Next, we will turn to key levels. We always like to start this with a look at the key Fib levels. Fib refers to Fibonacci, which is the number series that works toward a ratio limit of the Golden Ratio, often found as a key in nature as well as markets. In this case, the critical 38.2% level drawn off the 52-week high of $36.80 sits at $28.14. TWTR also has additional resistance above at the stocks 200-day simple moving average, which sits at $ 21.67.
While price action, trends, and volume are important, for traders, volatility may be as important as anything in defining the potential opportunity in a stock. Hence, we want to take a moment and consider this stocks overall range of movement, as well as its relative performance.
TWTR has moved $-0.38 over the past month or so. Over the trailing 100 days, the stock is outperforming the S&P 500 by 86.34%. This movement has come on a less volatile bearing from one day to the next relative to the broader market, according to the stocks 36-month beta. Similarly, we can see that the stocks recent action has come on a historical volatility score of 61.73%. To get that score, one has to take the standard deviation of returns for a random trading input assuming buying the stock at a given average price during the specified period.
On a more basic level, one might look at the 20-day ATR as a percentage of its 20-day moving average. That measure gives us a volatility score of 4.64%. Naturally, we will continue to keep close tabs on the stock and update this picture again soon.
Legal Notice: This work is based on what we’ve learned as financial journalists. It may contain errors and you should not base investment decisions solely on what you read here. It’s your money and your responsibility. Nothing herein should be considered personalized investment advice. Although our employees may answer general customer service questions, they are not licensed to address your particular investment situation. Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Don’t trade in these markets with money you can’t afford to lose. Investing in stock markets involves the risk of loss. Before investing you should consider carefully the risks involved, if you have any doubt as to suitability or the taxation implications, seek independent financial advice. StocksnTrade expressly forbids its writers from having a financial interest in their own securities or commodities recommendations to readers. Such recommendations may be traded, however, by other editors, StocksnTrade, its affiliated entities, employees, and agents, but only after waiting 24 hours after an internet broadcast.
(c) 2018 StocksnTrade. All Rights Reserved. Protected by copyright laws of the United States and treaties. This Newsletter may only be used pursuant to the subscription agreement. Any reproduction, copying, or redistribution, (electronic or otherwise) in whole or in part, is strictly prohibited without the express written permission of StocksnTrade. See site disclaimer for compensation.