Chart-in-Focus: Strong Relative Outperformance Of This Tech Stock Makes A Good Addition To Your Portfolio
This technology stock has seen an erratic relative performance against the broader S&P500 Index, but by and large, it has remained positively correlated with the broader markets. It has performed well during the rising markets and has not done so when the broader markets saw their corrective phases.
However, in the past several weeks, especially since September 2022, the behavior of the stock has diverged from that of the broader markets. It has seen strong relative outperformance against the broader S&P500 Index.
Twitter, Inc (TWTR) has gained seen strong relative outperformance against the S&P500 Index over the past four weeks.
Even during the year, on a YTD basis, while Twitter has gained 2.77%, the broader S&P500 Index has lost 25.25%. This divergence of performance had a lot to do with the kind of outperformance that TWTR saw against the broader markets over the past four weeks as evident from the above Relative Comparison chart.
TWTR marked its high point at 80.75 in February 2021; after that, a lower high was formed at 73.34. The stock, since then, remained in a falling trajectory and under a corrective decline as seen from a falling trend line that is drawn on the weekly chart.
After some significant corrective decline, the stock found its base near 30.50-31 levels. The recent price action has seen the formation of a Symmetrical Triangle pattern on the weekly chart.
A symmetrical triangle is basically a neutral pattern. No price breakouts must be anticipated and one must always wait for a confirmation before taking any directional cue.
The latest weekly close has seen TWTR training to break out of this Symmetrical Triangle formation. There are other multiple technical signals on the chart that also hints at the potential upward revision of the price of this stock.
The weekly PSAR has flashed a fresh buy signal. While the MACD stays in continuing buy mode, the RSI has marked a fresh 14-period high which is bullish. The stock is seen rolling back towards the leading quadrant on the RRG when benchmarked against the broader S&P500 Index.
The Relative Strength Line (RS Line) against the broader markets has not only reversed its trajectory and is rising higher, but it has also penetrated the falling trend line resistance and crossed above the 50-period MA.
If the price moves higher on the anticipated lines, the stock may test 50-51 levels. This translates into potential returns of 18% from the current levels.
Any close below 37 would negate this view.
Milan Vaishnav, CMT, MSTA,
Technical Analyst,
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
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