Is this Breakout Finally our Reversal in Twitter TWTR?

Oct 9, 2015: 10:21 AM CST

Twitter shares (TWTR) have taken a 50% tumble in 2015 but are we currently seeing the bullish reversal low?

As usual, let’s chart this development and update our trading levels for Twitter (TWTR):

After a strong bullish gap and surge took place at the beginning of 2015, Twitter shares stagnated above the $50.00 per share level and reversed with equal fervor lower, collapsing the price toward the eventual $35.00 per share support shelf (highlighted).

Price stabilized at this level for a few months before collapsing under it in July, falling under $25.00 per share.

A lengthy visual positive momentum divergence undercut the now Double Bottom reversal low at this level.

We’re seeing Twitter shares break above the falling 50 day EMA (blue) just under the $30.00 per share price.

Generally, positive divergences along with a reversal pattern – like a Double Bottom – can precede a reversal.

We need to see follow-through both from price (breaking above a falling Moving Average) and Volume.

We are seeing Volume (green) confirm the breakout with a visual higher uptick in buy volume as price crosses above the falling 50 day EMA.

So is this the reversal?  Odds have indeed shifted toward that probability, especially if price remains above $30.00.

Note the upside bullish potential price pathway initially toward $35.00 (the prior support) but also toward $38.00 (the falling 200 day SMA in red).

At a minimum, stop short-selling the stock while it is above the 50 day EMA breakout level.

A “Bull Trap” would trigger if price suddenly reversed and traded back under the 50 EMA so always be on guard for alternate outcomes.

The “Bull Trap” or “Flase Breakout” scenario would open a bearish sell pathway toward $25.00 again.

Continue monitoring volume flow and price action above the $30.00 per share bull/bear battle level.

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Corey Rosenbloom, CMT
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