Elon Musk's On/Off Again Twitter Takeover Is Back On: Here's A Look At The Social Media Stock

Zinger Key Points
  • Twitter is in need of consolidation after Tuesday's massive surge.
  • Consolidation will help Twitter's RSI to drop down to a more comfortable level.

Twitter Inc TWTR skyrocketed more than 21% on Tuesday after news that Elon Musk’s deal to purchase the micro-blogging platform was back on again.

The news came about two weeks prior to Oct. 17, the day on which Musk was scheduled to show up in court after being sued by Twitter for the Tesla Inc TSLA CEO’s attempt to back away from the deal.

Musk agreed to buy Twitter for $44 billion at $54.20 per share, matching his original offer. The news prompted Wedbush analyst Daniel Ives to raise his price target for the stock from $50 to $54.20.

The new price target makes sense because the share price is likely to become pinned near to the buy-out price as long as the road toward the deal officially closing remains smooth and Musk follows through with his plan to take the company private.

From a technical standpoint, Twitter is in need of consolidation after Tuesday’s massive surge, and on Wednesday the stock was beginning to show signs of consolidation by printing an inside bar.

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The Twitter Chart: Twitter opened slightly lower on Wednesday, in tandem with the general markets, but still within the top range of Tuesday’s mother bar. The pattern leans bullish in this case because Twitter was trading higher before forming the inside bar.

  • Traders can watch for a break up from the mother bar later on Wednesday or on Tuesday to take place on higher-than-average volume. If the stock doesn’t break up from the pattern, Twitter may continue to consolidate lower over the next few trading days.
  • Further consolidation, even if it brings the stock lower, would be healthy because Twitter’s relative strength index (RSI) reached almost 80% on Tuesday. When a stock’s RSI reaches or exceeds the 70% level it becomes overbought, which can be a sell signal for technical traders.
  • Twitter has resistance above at $52.42 and $55 and support below at $49.12 and $44.40.
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Posted In: Long IdeasSocial MediaShort IdeasTechnicalsTrading IdeasGeneralDaniel IvesElon MuskWedbush
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