Money Markets

Twitter, Inc. (TWTR): Examining the Technicals

Twitter, Inc. (NYSE:TWTR) stock flux has recently been causing stir among the investment community. At the end of the day, it’s only a stock’s performance that matters. With this in mind, it’s worth taking a look at the chart to get a sense of where it might be headed in the future.

How has the stock performed recently?

Twitter, Inc. (NYSE:TWTR) has been trading in a bullish manner, based on the relative positions of the stock’s 20 and 200 day moving averages. In the last month, the price of TWTR has increased +21.80%. Shares are now up over the past year, outperforming the broad market by -100% and outperformed a peer group of similar companies by 339%. After the latest session, which saw the stock close at a price of $30.95, TWTR sits below its 52-week high.

Momentum indicators

Of course, these surface-level price movements don’t tell us much about the direction that TWTR may be headed in the future. Fortunately, there is way to use the speed and magnitude of these price changes to predict future performance, thanks to what are known as momentum indicators. As momentum slows, it might be a sign that a support or resistance level has been reached, and that a trend is about to reverse. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for TWTR is 70.54%, which suggests that the stock may be primed for a trend reversal or a corrective pullback in price. The 20-day Stochastic %k measure, which sits at 68.21%, tells a different story, and suggests that TWTR currently trades in neutral territory.

What do the trading volumes reveal?

Volume patterns can also be useful for predicting future performance. When trading activity is abnormally high, it’s often a sign that the market feels particularly strong in one way or another about the future direction of a stock. Twitter, Inc. (TWTR) average trading volume of 41,823,031 during the past month is 110.47% above its average volume over the past year, indicating that investors have been more active than usual in the stock in recent times.

What do the analysts think?

TWTR is currently overvalued by 26.74% relative to the average 1-year price target of $24.42 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 3.10, which implies that analysts are generally neutral in their outlook for TWTR over the next year.

How risky is the stock?

In order to put TWTR’s recent price performance into context, we need to get a sense of how the stock moves in relation to the overall market. Beta, which measures a stock’s price volatility relative to the market, provides the cleanest measure of systematic risk for a stock.

Twitter, Inc. (NYSE:TWTR) has a beta of 0.58, compared to a beta of 1 for the market, which implies that the stock’s price movements are less extreme than the market as a whole. TWTR therefore has an below average level of market risk. During the past couple of weeks, TWTR average daily volatility was 70.43%, which is -16.5 percentage points higher than the average volatility over the past 100 days.

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