Twitter stock is falling after Elon Musk tries to walk away from his proposed $44 billion deal. Here’s where it can trade now.
Twitter (TWTR) – Get Twitter Inc. Report stock is down about 9% on Monday, and making new session lows in midday trading, as Tesla (TSLA) – Get Tesla Inc. Report Chief Executive Elon Musk tries to walk away from his proposed $44 billion deal for the microblogging platform.
The situation is playing out as quintessential Musk, with the deal facing constant drama right from the get-go.
Short-sellers — investors betting the stock price would drop — began publishing theses on why Musk could (or should) walk away from the deal, while Musk would — somewhat ironically — publicly tweet to Twitter CEO Parag Agrawal.
On Friday, Musk filed a notice with the Securities and Exchange Commission that he was walking away from the deal. Musk’s main argument is that the company would not provide accurate information on the number of fake accounts. The company stands by its SEC disclosures that less than 5% of its accounts are spam bots.
Now the two parties will head to court to settle the matter. That’s a bit ironic as Twitter originally balked at Musk’s offer and is now trying to force the sale to go through.
While more parts of the story continue to unravel, let’s do what we do best and focus on the technicals.
Trading Twitter Stock
Daily chart of Twitter stock.
Chart courtesy of TrendSpider.com
Based on the price action over the past two months, some investors clearly had doubts that the deal would go through.
At one point in May, Twitter shares fell almost 26%, declining in seven straight sessions. A big chunk of those losses came in a three-day stretch when the stock fell 19%.
Unfortunately for the bulls, it never really recovered from the decline.
Today’s action is decisive. If the bulls were in control, the stock would have reclaimed $35.40, which was the second-quarter low and the lowest level Twitter stock traded at following the proposed deal from Musk.
Had the stock gapped down and then reclaimed $35.40, we could be looking at a potential long setup. Instead, Twitter stock gapped below this level and has been melting ever since.
In that sense, investors have only two key levels to keep an eye on, with $35.40 being one of them. The other is $31.30, which is the 2022 low.
Given the way tech stocks and specifically social-media stocks have traded lately, I’m surprised Twitter stock is holding up as well as it is. (That’s not really a strong endorsement.)
Look for a break of $31.30. A close below it and a break of $30 could eventually put the covid-lows in play near $20.
