The Blue Bird Sings the Blues

Trick or treat? For the blue bird that tweets, the treats are few and far between this Halloween. 

Shares of Twitter Inc. (NYSE: TWTR) have taken a serious hit this week after the company reported on Monday that it had less than expected user growth in the third quarter ending 9/30/14 and mounting losses despite rising revenues.

TWTR started the week off at $50.02 a share. By the end of the day on Thursday, it closed at $41.80, having traded as low as $39.94 earlier that morning. The stock has lost nearly 20% of its market value in the span of four trading sessions.

Per the chart below, we find that the stock is now trading under $45 and could very well close beneath it to finish off the week. This level has served as a critical support area since the bulls pushed the stock above it to finish off the week of 8/18/14. 

$TWTR : Twitter Inc.

To put this in perspective, prior to the week of 8/18/14, TWTR had not closed above $45 on a weekly candle since the week of 4/14/14.  It took the bulls just over four months of accumulation to finally surpass this level again.

Now, for the first time since mid-August, we are trading below this key level once more. Any near-term short covering rallies will likely be restrained by sellers around $45, as the momentum is in the favor of the bears for now.

Judging from the daily chart, support seems to be around the $39 level. On a longer horizon, traders should keep in mind that the stock's IPO price was $26 a share when it first made its debut in November 2013. Although we are well above that price still,  TWTR did trade as low as $29.51 in early May; note that the stock has never had a weekly close below $30.

For the bulls to overcome the bears now, a weekly close above $45 followed by a continuation of momentum to the upside would be ideal. However, this would likely necessitate a fundamental catalyst that reignites broad investor interest in the stock.