Tesla and Twitter stocks are in focus as Musk makes a play for Twitter. Let’s look at the charts for both.
Twitter (TWTR) – Get Twitter, Inc. Report stock is jumping higher on Thursday, now that Tesla (TSLA) – Get Tesla Inc Report CEO Elon Musk has offered to acquire the company.
Musk has offered $54.20 a share for Twitter, arguing that the company should be private given the overhaul that is needed. He said:
“Since making my investment I no realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company. As a result, I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced.”
So far, Twitter stock isn’t buying. Shares are up less than 1% as of this writing, after initially opening higher by 5.5%. It will need to rally another 12% just to hit Musk’s buyout price.
It says to me that the market doesn’t put much merit in the deal. Either from Musk’s previous antics (like offering to buy Tesla stock for $420 a share) or if Twitter would accept such an offer.
Already, one large Twitter shareholder, Prince Alwaleed, has rejected Musk’s buyout offer.
Trading Twitter Stock
Daily chart of Twitter stock.
Chart courtesy of TrendSpider.com
Looking at the chart, it’s clear that Wall Street is skeptical of the deal.
After an initially strong couple of days following news that Musk had taken a stake, Twitter stock faded hard from the mid-$50s and the 200-day moving average.
For now, it has found support at the 10-day moving average. However, if Twitter stock breaks this week’s low at $44.44, then it wouldn’t surprise me to see the stock trade down to the 200-week and 21-day moving averages near $42.50.
Below that opens the door down to $41, then the gap-fill level at $39.85.
On the upside, the gains are likely capped right around $54.20. Of course, a higher offer or more suitors could line up to acquire Twitter, but for now I’m looking at that area as the ceiling.
Trading Tesla Stock
Daily chart of Tesla stock.
Chart courtesy of TrendSpider.com
As for Tesla stock, shares are down about 2.75% as investors weigh the possible implications of what this potential deal means for their holdings.
Musk offered roughly $41.4 billion in an all-cash deal. However, most of his net worth is tied up in Tesla stock. Would he have to sell in order to finance the deal?
The short answer is, “no.” However, it does create an additional liability, even if we assume he borrows against his Tesla holdings to finance the deal.
In any regard, how does the stock look?
Shares are caught in a tough spot, between the short-term moving averages like the 10-day and 21-day, but above longer term measures like the 50-day and 200-day.
While the Twitter news is driving the stock today, don’t discount events like the continued shutdown in Shanghai and how that will impact Tesla’s production and delivery results.
Back above $1,025 and Tesla stock will have momentum and puts bulls back in control. Below that level though and I’m a bit cautious.
On the downside, aggressive buyers can look for a dip to the 10-week moving average. Otherwise, let’s see how Tesla holds up near the 50% retracement and the 50-day moving average.
Below these measures could open the door down to the 200-day moving average and the 61.8% retracement.
