Market Overview

Twitter Testing Critical Support


The incredible run in Twitter Inc. (NYSE: TWTR) may be coming to an end.

Since bottoming near its opening day price (44.90) at 45.02 on December 9, the issue has gained 150%, reaching 74.73 in Thursday's volatile trading session. However, the issue is deep in the red in Friday's trading, reaching 68.95 (down over 4%) before recovering to 70.60 and then resuming its decline.

The current rally was derailed by a downgrade from Neutral to Underperform at Macquarie on Friday morning. Shortly after the announcement, nervous longs and aggressive short sellers began to feast on the issue. Since many investors are waiting for a trigger to unload shares after Thursday's mind boggling session, Macquarie provided the catalyst. Keep in mind, tops in bubble stocks are preceded by inexplicable and volatile price action, which certainly was reflected in Thursday's nearly six point range.

Now the moment of truth has arrived for this issue. With shares matching Thursday's low (69.13) at 68.92, the issue may have to travel nearly three points to find a minor support level. At that point, it may encounter minor support at Tuesday's low of 65.56. If that level is breached, investors may want to “bar the door,” as the next major support level cannot be found until five points lower at Monday's low of 59.60.

Also, with the issue now five points off, buyers who were late to the game are going to lowering their offers to exit. Meanwhile, aggressive short sellers and High Frequency Traders will be feasting on any sizable sell orders displayed in the open market. Therefore, traders should focus on the half and whole numbers (i.e. 70), as “Joe Public” and big boys battle it out to exit the issue on any rallies.

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