Why Twitter Shares Are Soaring Today
Joel Elconin is the co-host of Benzinga's #PreMarket Prep, a daily trading idea radio show.
Twitter Inc (NYSE: TWTR) shares were trading sharply higher by $1.85 (3.6 percent) at $52.69 in Tuesday's session. he massive rally may be attributed to two different causes.
First is unconfirmed chatter that Twitter may be the target of a takeover. As always, when rumors like this surface, aggressive traders buy with reckless abandon and send shorts scrambling for cover.
The other and more plausible reason is a good old-fashioned technical break out to the upside. After clearing the major resistance at the $50 level on March 24 reaching $51.79, the rally stalled the following day at $51.87; with the assistance of downgrade by Pivot Research, the issue returned to the former breakout level ($50) and consolidated at that level for five days.
Over the next three trading sessions, it grinded to the $51 level before soaring in Tuesday's session. After a higher open (Monday's close of $50.84 vs. Tuesday's open $51.01), it retreated and found support just above the close, only reaching $50.86 before taking off.
Coincidentally, the takeover rumors surfaced just as Twitter was approaching its major resistance level. Without hesitating it blasted through that level as well as the institutional sellers at $52.00, reached $52.80 and is not backing off that level.
If the rally continues, it's hard to identify a major resistance point, since the next identifiable resistance level stands at its October 10 high ($55.56). The steep decline that day (falling from $55.29 to $50.400) was attributed to an all-out assault on social media stocks.
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