Is Twitter a Buy or Sell After Its Post-Earnings Plunge?

Twitter is getting crushed after reporting disappointing user growth. Is that a buying opportunity or should investors stay clear of this one?
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It’s been a mixed bag for social media stocks this quarter as Twitter  (TWTR) - Get Report wraps up earnings from the Big Four.

Facebook  (FB) - Get Report ripped to new all-time highs after easily clearing top- and bottom-line estimates, while Pinterest  (PINS) - Get Report sank 14.5% despite what was actually a pretty strong report.

In a volatile session last week, Snap  (SNAP) - Get Report opened higher by 8.7% and gave up virtually all of its gains before the stock finished higher by roughly 7.5% after its quarterly results.

For Twitter’s part, the stock has been following the path of Pinterest, with shares currently down 14% on the day.

While the company beat on earnings expectations, user growth disappointed Wall Street.

The analysts weren’t impressed either, causing a number of them to cut their price targets on the stock. One investor even called the stock a long-term secular short.

Let’s have a look at the charts to see what the technicals might suggest.

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Trading Twitter

Daily chart of Twitter stock.

Daily chart of Twitter stock.

There’s no other way to put it: Twitter stock is tumbling into no man’s land.

However, there’s one level worth paying attention. The $55 to $56 area was notable resistance in December and January. The stock actually pulled back pretty hard from this zone, ultimately finding its footing around $45.

In February though, Twitter did break out over this zone, powering through it amid a strong rally. The breakout occurred amid an 11-day win streak, as shares ultimately rallied from $45 to $75 in just over a month.

Now dipping into the $55 to $56 zone now, there’s not much else nearby that can support Twitter.

At least, nothing that’s obvious.

If $55 holds, look for a bounce over the post-earnings high from Friday. Above that could put the $60 level and the 21-week moving average in play as Twitter attempts to fill some or all of its post-earnings gap.

On the downside, a move below $55 could put more downside in play. Specifically, it could put the 50-week and 200-day moving averages in play, as well as the $50 mark.

I like to look at multiple timeframes, which includes the monthly chart. The 10-month moving average current sits at $52.60 and could act as a level of support before the stock hits its other key moving averages on the daily and weekly charts, so keep that in mind.

For now, Facebook is the relative strength leader of the group.