Shares of Twitter (TWTR) appear to have regained their footing over the last two weeks. The stock has remained in a very narrow range while building a solid base just above its 200-day moving average. This constructive action follows the extremely damaging collapse that began on Oct. 6.
For patient Twitter bulls, a low-risk entry opportunity may now be developing.
Immediately after Twitter's second huge downside gap on Oct. 10, it is becoming clear that the extreme pressure was beginning to ease. The stock made a slightly lower low a few days later as a bottoming pattern began to develop.
Since the low on Oct. 14, shares have been steadily improving. After last Friday's nice gain, Twitter has put in three straight higher weekly lows. Considering the broad weakness in the markets, which has included eight straight loses for the S&P 500, this divergent action should be encouraging for the bulls. While the S&P 500 was consistently losing ground, Twitter finished in the green six of the last sessions.
In the near term, Twitter bulls should take on a more positive view of the stock. A solid bottom may be in place now that the post-Oct. 6 flush appears to have run its course.
Twitter should be considered a low-risk buy near current levels. The area where shares have been basing -- just above a scooping 200-day moving average -- forms a key support zone.
On the downside, a close back below the $16 level would violate the October low, indicating a more prolonged bottoming pattern will be needed before Twitter can mount a recovery move.