Could Twitter Have a Major Breakout Brewing on Earnings?

Twitter has lost some momentum ahead of earnings but has come bouncing back. Let's look at the potential breakout brewing in the stock.
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Social media stocks like Twitter  (TWTR) - Get Report were buried in March. That was on fear of plunging ad revenue amid the coronavirus outbreak.

While there was some senseless selling across the board during the panic, the fear was that social media companies would see a prolonged shortfall in revenue as corporate marketing budgets were slashed.

Fortunately, the dip in ad spending appears to have been temporary, at least based on what investors have heard from Alphabet  (GOOGL) - Get Report, Facebook  (FB) - Get Report and others in recent months.

On the plus side, engagement and user growth has been strong for social media platforms - even though the recent earnings report from Snap  (SNAP) - Get Report disappointed investors.

While Twitter  looked set for declines during its latest hacking issue, we were quick to note that that was likely a buying opportunity. With earnings on deck for Thursday before the stock market opens, investors are wondering what Twitter could have in store for investors.

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Trading Twitter Stock

Daily chart of Twitter stock.

Daily chart of Twitter stock.

As you can see on the daily chart above, shares were quick to bounce and actually push through $36 resistance. The move clearly puts $39 and the February high in play up at $39.64.

If Twitter stock reacts bullishly and trades up through these levels, it will hit fresh 2020 highs. That’s not something many investors would have thought was possible just a few months ago.

Currently above all of its major moving averages, both on a weekly and daily basis, there are not many overhead levels to keep an eye on in that respect. Shares are also above the key retracement points from the current 2020 range.

With Tuesday’s rally, Twitter finally filled its February gap, leaving potential upside over $40 in play should shares rally on earnings. If Twitter can sustain itself over $40, look for a test of the 123.6% extension up near $44.28.

On the downside, it would be most encouraging to see the 10-day moving average and 61.8% retracement act as support near $35.50. That’s about 3.5% below current levels, so it’s a little tight, but it’s about 8% below this week’s high.

Below that area puts the 20-day and 50-day moving averages in play between $33 and $33.50.