Chart Wars: Snap, Twitter Stocks Near Entry Signals To Go Long For 2022 — Here's What To Watch For

Snap Inc SNAP and Twitter Inc TWTR were sliding significantly on Tuesday in sympathy with a number of technology-based stocks, losing more than 7% and 5%, respectively, intraday while the SPDR S&P 500 fell about 0.33%.

Both stocks have, mostly, been trading in a heavy downtrend recently with Snap plummeting over 48% since its Sept. 24 all-time high of 83.84 and Twitter falling about 41% since it’s Oct. 20 high of $68.41. In contrast, the SPY rose over 11% during the fourth quarter of 2021 to reach an all-time high of $479.98.

On Tuesday, both stocks fell into territory they had not traded in since Nov. 20, 2020, which is bearish, and both stocks have settled into falling channels on the weekly chart. A falling channel is a bearish pattern, where a stock prints a series of lower highs and lower lows between two downward sloping parallel lines, but bullish traders can watch for a break up from the pattern as an indication of a trend change is about to begin.

It should be noted that events such as the general markets turning bearish, negative reactions to earnings prints and negative news headlines about a stock can quickly invalidate bullish patterns and breakouts. As the saying goes, "The trend is your friend until it isn’t," and any trader in a bullish position should have a clear stop set in place and manage their risk versus reward.

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The Snap Chart: Snap has been trading in a falling channel since the week of Nov. 15 and on both Monday and Tuesday, the stock attempted to break up from the pattern but failed.

• Aggressive bullish traders may choose to take a position in Snap when the stock prints a reversal candlestick at the bottom of the falling channel, while conservative bullish traders may prefer to wait until Snap breaks up over the top of the upper descending trendline.
• Snap has a gap below on the chart and if the stock falls bearishly through the falling channel it becomes increasingly likely Snap will fill the gap, which would also provide a solid entry for bullish traders to go long.
• Snap has resistance above at $43.26 and $47.92 and support below at $39.96 and $37.35.

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The Twitter Chart: Similar to Snap, Twitter has been trading in a falling channel since the week of Nov. 8 and has tried to break up bullishly from the pattern over the past two trading days and failed.

• Like with Snap, the bottom line of the channel provides a support level for aggressive bullish entries while a break up from the pattern could signify an uptrend is in the cards for traders to go long.
• Twitter’s relative strength index is measuring in at about 30% on the weekly chart, which indicates the stock is oversold. Historically, when Twitter’s RSI reaches that level, a bounce follows.
• Twitter has resistance above at $41.01 and $44.40 and support below at $38.93 and $37.37.