Twitter's Stock Looks Ready For A Gap Fill

Twitter Inc TWTR printed a big beat on its first-quarter 2021 earnings but gapped down almost 14% the following day after issuing disappointing second-quarter guidance.

The social media company reported revenue of $1.04 billion and earnings per share of 16 cents. Second-quarter guidance of $980 million to $1.08 billion disappointed investors, however, as the consensus is for revenue to reach $1.06 billion.

The gap down has left opportunity for traders, because gaps fill 90% of the time, and it looks as though Twitter is getting ready to rise up and fill the gap.

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The Twitter Chart: Twitter found a bottom near the $49 level after its steep sell-off and created a bullish double bottom pattern on May 11 and 13. On Friday, Twitter’s stock printed a bullish hammer candlestick on the daily and continued upwards momentum should pop Twitter up over resistance and into gap fill territory.

Twitter has spent the last 16 trading days in a sideways channel between support at $49.12 and resistance at $55.45

On May 18, Twitter’s stock regained the support of the eight-day exponential moving average (EMA), which is bullish and the stock is trading, and being supported by, the 200-day simple moving average indicating that overall sentiment in the stock is also bullish. Twitter is trading slightly below the 21-day EMA, however, which is slightly bearish.

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Bulls want to see Twitter’s stock regain the $55 area as support, which will also allow it to trade back above the 21-day EMA. If Twitter’s stock can pop over $55.45, there's not much resistance, in the form of price history, to stop its stock from completely filling the gap and reaching the $64 area.

Bears want to see Twitter’s stock smacked down at the $55 level and for it to retrace back towards support of $49.12. If the stock was unable to maintain that level as support, it could trade down toward $44.40 before potentially bouncing.

TWTR Price Action: Shares of Twitter were trading higher by 3.5% to $56.36 at publication time.