Trade the Twitter Breakout Using These Nifty Charts
Twitter hanging out on the NYSE

Twitter (TWTR) shares were up 4% in Tuesday's session, closing near their session high, and at an intersection of the 50- and 200-day moving averages.

The stock has been consolidating below this nexus of resistance since the end of last year. It may now be ready for a tradable move higher.

The daily chart shows the sharp drop in price last October, which was highlighted by two wide gaps lower. Over the next two months, it was able to move off the low and close the lower gap, briefly retaking its 50-day moving average. The attempt to make higher lows failed going into the end of the year, and the stock moved back below the 50-day average and continued down through the 200-day average.

Since that time, it has formed a "W" shaped bottoming pattern below resistance in the $17.50 area, which is the intersection of the two moving averages, a horizontal resistance level, and the upper Bollinger band.

The relative strength index has moved back up above its center line, reflecting recent positive price momentum. The aroon indicator -- a momentum indicator based on time relative to price rather than price relative to time, meaning it identifies new highs and early shifts in trend -- is making a bullish crossover. Chaikin money flow is in positive territory for the first time since November 2016, and is suggesting renewed buying interest in the stock.

Twitter is a speculative short-term long at its current level, using an initial percentage stop under the $16.25 level. The company is scheduled to report earnings before the open on Feb. 9, and it would be prudent to exit the trade before the announcement.

This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.

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