Happy Birthday Twitter

March 21, 2016

Mish's Daily

By Mish Schneider

Checking the vital signs

Before you get into tonight's commentary, tap this link to join me in a live webinar Tuesday night. In the webinar I'll show you my strategies for identifying great swing trades using the Market Phases I use here in my daily commentary. Regardless which way the market moves from here, I will guide you on how to profit from my 10 Megatrends for 2016 plus walk you through the ups and downs of my Modern Family.

Twitter turned 10 years old today. It has barely mustered up a rally while the market has impressively risen from its recent lows. Since my focus for 2016 is to look at potential buy opportunities in beat-up stocks that might turn around, Twitter merits a physical checkup.

Furthermore, Twitter and I share the same birthday.

Happily, although the last 12 months have not been kind to twitter, I have been way more fortunate. First off, except when I post on twitter, I am not confined to 140 characters or less. Maybe some would wish otherwise..

Twitter’s survival depends a lot on attracting Millennials, which thus far it has failed to do. At, never-you-mind what age, although I can hardly say my survival depends on it (thank goodness), I do post on Twitter primarily to share my financial expertise.

Twitter’s current fundamentals

Millennials mainly use Snapchat, Instagram and Kik. Aware of this dilemma, Twitter is trying to attract younger people. Besides acquiring Niche, Vine and Periscope, it’s also working on integrating GIFs. Twitter has bumped up its marketing strategies and ad sales as well.

“In 2015, ads brought in nearly $2 billion, a 59 percent spike versus the prior year. Most of that, or $1.8 billion, came from advertising services on Twitter, while another $194 million came via third-party publishers.” Adweek Marty Swant

After researching several different sources, it occurs to me that Twitter might ultimately be a better candidate as a buyout.

However, the technical picture remains compelling

Although today I focus on Twitter, I use the identical technical analysis to assess risk/reward on every instrument. My process is consistent.

On February 11^th, Twitter (TWTR) made a new low on huge volume. The next day, the rally continued and it confirmed the criteria for a solid brick wall reversal.

Rallying from 14.00 to 20.00 rather quickly, the current price is 16.89. Interestingly, that’s a bit above the middle of the 2016 trading range.

The phase is bearish with the 50 DMA above at 17.39. Twitter is trading just under it 6-month Calendar Range low at 17.27. For now, that keeps the trend under pressure, in spite of its reversal bottom.

I see 16.00 as a good support area. I would not want to see it retest anywhere near the lows around 14.00. I am watching for TWTR to change and confirm into a Recovery Phase for starters. That would take it back over the January 6-month range low.

Volume patterns suggest more distribution than accumulation. I would want to see volume come in on the buy side as it did in mid-February.

If volume does come in, I like a risk down to 16.00. If it can clear the 17.35 area, the risk/reward makes sense to see if it can move back to 20.00. From there, we could see 21.25.

Twitter boasts 500 million tweets per day. The stream, during some of the biggest social moments this last decade, accounts for 200 billion posts each year.

Will Twitter survive another 10 years? If it could blow out the candles on a birthday cake and make a wish, I’m guessing it would be to wish for at least 10 more years. Come to think of it, when I blow out the candles on my cake tonight, my wish will be pretty much the same.

S&P 500 (SPY) Another low volume rally with 204 the pivotal area

Russell 2000 (IWM) Doji day-the whole market felt like it was on pause.

Dow (DIA) 175 pivotal

Nasdaq (QQQ) Must continue to hold 106 and clear 108. 110.18 its JCRH.

XLF (Financials) 22.85 the 100 DMA. 23.53 the JCRH

KRE (Regional Banks) 38.50 pivotal

SMH (Semiconductors) Inside day and strong

IYT (Transportation) Doji here too.

IBB (Biotechnology) Starting to maybe look like a double bottom which would help the market up even more

XRT (Retail) Inverted doji which means sellers tested resolve and couldn’t force it lower

IYR (Real Estate) 75.78 the JCRH-good support level to hold

ITB (US Home Construction) 26.75 a key area to clear and close above