Markets are coming into the first full post-Thanksgiving trading session with a hangover.
The big indices are correcting Monday, thanks in part to refreshed trade tensions (this time with Brazil and Argentina) and U.S. factory data that came in weaker than analysts were hoping for. One of the hardest-hit sectors by the selling Monday is tech.
Twitter is off 1.8% midway through the session, unwinding about a quarter of this stock's year-to-date performance in the process.
But don't mistake Twitter's correction for a reason to steer clear of shares this winter. In fact, bulls could end up having the last laugh in the final stretch of 2019. To figure out why - and how to trade it - we're turning to the chart for a technical look.
At a glance, it's clear that Twitter's price action has been in two "modes" in 2019. Shares spent most of the year in an extremely well-defined uptrend, catching a bid on every test of trendline support as shares bounced higher. That changed in October, when Twitter plunged more than 20.8% in a single session on the heels of the firm's third-quarter earnings.
That earnings-fueled selling didn't come out of left field, however. Shares actually violated their uptrend a couple of trading sessions before the big gap lower, indicating that buying pressure was already tapped out before the fundamental data hit. When the numbers disappointed, there was a void of demand for shares - and Twitter plummeted.
What's critical, though, is the fact that shares have been incredibly technically obedient this year. Now, a pretty straightforward price setup clears the way to a year-end rally.
Twitter has spent the last month or so forming a rounding bottom pattern, a bullish reversal setup that looks exactly like it sounds. The setup indicates a gradual shift in control of shares from sellers back to buyers - and it triggers on a meaningful breakout above the $31 price level.
Twitter's retreat from $31 Monday might look bad for bulls, but in reality it's chipping away at the glut of supply of shares at the $31 level. A breakout above $31 means that it makes sense to build a starter position in this beaten-down tech trade.
From there, $32 is the next line in the sand that needs to get crossed for Twitter to start filling the gap that was made in October. That's likely to be a much less significant level to cross.
Keep a close eye on Twitter here, particularly as shares start to come back intraday Monday. After a rough fall, this stock could make up for lost time in the final weeks of 2019.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.