Jun 01

Twitter Advances in a New Bearish Leg

Twitter (NYSE:TWTR) declines on Friday, falling by the third day in a row. However, the social media company ends May soaring at 8.30%.

On the technical side, TWTR completed the second leg of its mid-term corrective structure corresponding to wave B of Minor degree labeled in green, which began on March low at $20.01 per share.

Twitter, in its hourly chart, exposes the corrective structure that began on February 06th when the price topped and found sellers at $39.63 per share. Once the price reacted bearishly, TWTR started to decline in a three-wave sequence. This downward formation dragged the social media company to ease over 49% of founding support at $20.01 a share on March 18th in which the price ended its wave A of Minor degree labeled in green.

Once TWTR found fresh buyers on March low, the price reacted in an upward corrective structural series in three waves, which ended at $34.26 on May 27th. This level coincides with the zone of the 61.8% of the Fibonacci expansion. With this rejection and the breakdown of the ascending trendline of wave ((c)) of Minute degree identified in black, Twitter confirmed the start of the third leg of the mid-term corrective structure in progress.

We foresee a new bearish leg for the following trading sessions, which, according to the Elliott wave theory, should be developed in five internal segments. On the other hand, considering the alternation principle, as the firs bearish wave corresponding to wave A and the second corrective move identified as wave B in green are different, the third movement should be similar to wave A in terms of time, price or both.

On the other hand, considering that the RSI oscillator shows an intraday oversold, TWTR could experience a retracement, which couldn’t extend beyond the origin of the current downward movement. If this situation occurs, then TWTR could be developing a flat pattern with a failure in wave B so that wave C could extend beyond the origin of wave B.

If the price soars above the last high, this will indicate that wave B is incomplete, and the mid-term corrective pattern corresponds to a regular flat, and wave C could extend until the origin of wave B.

In consequence, our preferred positioning in the short-term remains neutral until the wave C completion, in where we could expect for long-side indications.