It’s troubling when a divergence shows up between the good earnings news and how the price of the stock reacts to it. This is especially true when it comes to a big name, big tech company sporting a high price-earnings ratio and whose CEO shows up at Bitcoin conferences.
The trend has been for these types of equities to join the 2. That is, decent earnings reports lately tends to equal an even higher stock price than before. Facebook and Apple are examples. When this doesn’t happen, an analyst doing the homework begins to wonder why.
That’s the situation with Twitter right now, a company with many enthusiastic supporters among the “just look at these earnings!” crowd. Okay, now I’ve looked at them — why aren’t more buyers showing up here? If things are so good, why are sellers coming in earlier than they used to?
In the current bull market environment, typically one should follow the other for a solid bullish kind of look to continue.
The daily price chart for Twitter shows the price high failure:
You can see where the price peaked several months ago and then sold off substantially. Analysts who have fallen in love with this earnings report need to explain the reasons that so much selling is appearing at a price much lower than the old peak.
Twitter’s weekly price chart looks like this:
That’s a nice move upward off of the early 2020 lows during the pandemic scare. Will this kind of momentum continue?
Here is Twitter’s monthly chart for the longer-term view:
And for a different perspective, the Twitter point-and-figure chart:
You don’t need an MBA or machine learning or artificial intelligence to understand the movement of price. When a stock can’t make it up to or past a previous high on the good news of increased earnings, something’s up. It may be an unrecognized issue, who knows? It probably pays to notice such a divergence.
The price certainly could continue to move higher as the days and weeks go by.
Not investment advice. Do your own research and always consult with a registered investment advisor before making any decisions.
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