Snap Inc. and Twitter Inc. were sliding significantly on Tuesday in sympathy with a number of technology-based stocks, losing more than 7 percent and 5 percent, respectively, intraday while the SPDR S&P 500 fell about 0.33 percent.
Both stocks have, mostly, been trading in a heavy downtrend recently with Snap plummeting over 48 percent since its Sept. 24 all-time high of 83.84 and Twitter falling about 41 percent since it’s Oct. 20 high of $68.41. In contrast, the SPY rose over 11 percent 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.
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.
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 percent 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.
