Twitter, Inc (NYSE: NYSE:TWTR) spiked up over 5% higher at one point on Friday and was holding stronger intraday than the general markets, with the S&P 500 plunging almost 2%.
The stock’s comparative strength is likely due to Tesla, Inc (NASDAQ: TSLA) CEO Elon Musk’s tender offer to acquire Twitter for $46.5 billion, which was revealed through a series of SEC documents dated April 20 but released on Thursday.
Thursday’s news helped Twitter to close the trading session up slightly and on Friday, the rise caused the stock to print a higher high to confirm an uptrend.
An uptrend occurs when a stock consistently makes a series of higher highs and higher lows on the chart.
The higher highs indicate the bulls are in control while the intermittent higher lows indicate consolidation periods.
Traders can use moving averages to help identify an uptrend with rising lower timeframe moving averages, such as the eight-day or 21-day exponential moving averages, which indicate the stock is in a steep shorter-term uptrend. Rising longer-term moving averages, such as the 200-day simple moving average, indicate a long-term uptrend.
See Also: If You Invested $1,000 In Twitter When Jack Dorsey Stepped Down, Here's How Much You'd Have Now
A stock often signals when the higher high is in by printing a reversal candlestick such as a doji, bearish engulfing or hanging man candlestick. Likewise, the higher low could be signaled when a doji, morning star or hammer candlestick is printed. Moreover, the higher highs and higher lows often take place at resistance and support levels.
In an uptrend, the "trend is your friend" until it’s not, and in an uptrend there are ways for both bullish and bearish traders to participate in the stock.
- Bullish traders who are already holding a position in a stock can feel confident the uptrend will continue unless the stock makes a lower low. Traders looking to take a position in a stock trading in an uptrend can usually find the safest entry on the higher low.
- Bearish traders can enter the trade on the higher high and exit on the pullback. These traders can also enter when the uptrend breaks and the stock makes a lower low, indicating a reversal into a downtrend may be in the cards.
The Twitter Chart: On April 12 and April 18, Twitter tested a support level at $44.40, which created a bullish double bottom pattern. The stock then formed a triple inside bar pattern on the daily chart. On Friday, Twitter broke up bullishly from the pattern, which caused the stock to form a higher high above the most recent higher high printed on April 18.
- The most recent higher low was printed on April 19 at the $45 mark. If Twitter continues trading in an uptrend, the stock will eventually need to print another higher low above that level, which may give bears who are not already in a position a solid entry point.
- If Twitter continues to trend higher, it will meet resistance at the 200-day simple moving average, which is trending at about the $50 mark. Bullish traders will want to see Twitter slide up through the level, while bearish traders can watch for a rejection of the area as a place to enter short.
- Twitter has two gaps on its chart. The closest gap is down between $39.85 and $44.44 and the second higher gap is between the $60.16 and $60.94 range. Gaps on charts fill about 90% of the time, making it likely Twitter will trade into both empty ranges at some point in the future.
- Twitter has resistance above at $49.12 and $52.42 and support below at $44.40 and $41.01.
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