Twitter Is Hanging Out in a Low-Risk Buy Zone

Twitter was working on a seven-day losing streak at the start of this week, but the stock has now developed a low-risk entry opportunity.
By Gary Morrow ,

Twitter (TWTR) - Get Report began a steady slide lower in late October, but the stock is currently flashing buy signals.

Heading into this week, the stock was working on a seven-day losing streak that drove shares through layers of support. As this week comes to an end, Twitter is showing significant improvement after dipping down to its September/October lows. For patient bulls, a low-risk entry opportunity has developed.

On the Oct. 27, shares closed at their best level since late July after undergoing a series of heavy accumulation days earlier in the month. Unfortunately for the bulls, this bullish action ended abruptly on Oct. 28 when the stock cratered more than 10% on the opening bell. The stock recovered the bulk of this earnings-inspired flush, but the upside momentum displayed in the weeks before the report was completely wiped out. Since then, Twitter has fallen nearly 20% from its Oct. 28 settle.

This week, Twitter has settled in just above a key support zone near $24.50. This area marks both the stock's September and October lows. With selling pressure easing dramatically this month, Twitter is looking rather sold out and may be ready to leave behind a third straight monthly low just under $25.

In the near term, investors should consider the $24.50-to-$25.50 area as a low-risk buy zone. If the current basing pattern continues to improve, Twitter will be set up for a healthy rebound move. On the downside, a close below $23 would be a clear warning sign that the bottoming process will continue for some time.

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Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long TWTR.

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