Bearish signs showing in Twitter

Elon Musk, the CEO of Tesla, has enlisted the help of 19 billionaires, corporations, and funds to raise more than $7 billion to bankroll his acquisition of Twitter, which he claims is in the service of “free expression.” Musk is obligated to pay $44 billion for the platform, which he will be unable to pay unless he puts his Tesla stock as collateral. With these new investors, he’ll just have to put up half that amount himself.

Aside from the usual suspects of Silicon Valley venture capital firms and heavyweight foreign investors, there are a number of prominent Donald Trump supporters, advocates for looser social media moderation policies, and a major crypto exchange, which is undoubtedly ecstatic to be working with the world’s most prominent proponent of Dogecoin. Maybe they’re all in it for the money: Musk sold these investors on his bold intentions to build Twitter by lowering expenses and monetizing tweets. Alternatively, they may wish to make Twitter the social network of their dreams. Here’s a rundown of the investors who could soon be chevaliers of Twitter.

Right-wing and far-right individuals have praised Musk’s acquisition, claiming that Twitter targets them because of political prejudice. Musk, whose opinions aren’t totally apparent, hasn’t refuted this claim, and has even criticized the left for being too radical. At the same time, his quest has alarmed academics and users who want Twitter to keep the worst of the worst off the platform—Nazis, QAnon supporters, and radical anti-vaxxers. Musk hasn’t spoken anything about how he plans to reform the company’s practices. He may also be unable to significantly alter Twitter’s moderation process due to constraints such as the European Union’s upcoming Digital Services Act, which will oblige social media platforms to more strictly monitor material.

His choice of co-owners, though, might be telling. Aside from the usual suspects of Silicon Valley venture capital firms and heavyweight foreign investors, there are a number of prominent Donald Trump supporters, advocates for looser social media moderation policies, and a major crypto exchange, which is undoubtedly ecstatic to be working with the world’s most prominent proponent of Dogecoin. Maybe they’re all in it for the money: Musk sold these investors on his bold intentions to build Twitter by lowering expenses and monetizing tweets. Alternatively, they may wish to make Twitter the social network of their dreams. 

The price of the Twitter deal could be lowered.

Due to a drop in tech equities and a poor financial performance at the social media site recently, Elon Musk might submit a lesser bid for Twitter, according to a US business notorious for betting against companies’ share values.

According to Hindenburg Research, there is a “significant likelihood” that Elon Musk may try to pay less than the negotiated purchase price of $54.20 (£43.90) per share, which values Twitter at $44 billion and has been approved by the board of directors.

It stated the tech-dominated Nasdaq stock market has dropped considerably since the world’s wealthiest person announced on 4 April that he had bought an initial position in Twitter, signaling a reduced share price for the social media platform, whose value has been held up by the takeover scenario. According to Hindenburg, if Musk leaves, Twitter’s stock might be dragged down by the Nasdaq’s unfavorable sentiment and plunge by 50%.

Hindenburg went on to say that Twitter’s latest quarterly performance were weak and had not been priced into the market, and that Musk might walk away from the transaction for a $1 billion breakup fee. Twitter could not enforce a condition in the takeover agreement that forced the multibillionaire to finish the transaction, according to the financial research firm.

According to Hindenburg, the deal’s current form would leave Twitter heavily in debt, making Musk’s objective of decreasing the company’s reliance on advertising more difficult to execute. 90 percent of Twitter’s $5 billion in yearly income comes from advertisements.

The acquisition is partially backed with $27.25 billion in cash, with $7.1 billion coming from a group of investors and the remainder coming from Musk. A total of $6.25 billion in loans is secured against Musk’s Tesla stock, with $13 billion in debt financing. Interest payments on the bank debt will cost Twitter between $800 million and $900 million every year.

Last year, Hindenburg grew to attention by taking a hard line against special purpose acquisition companies, or Spacs, which are investment entities that raise money first and then look for firms to purchase afterwards.

Elon Musk ambitions for Twitter

Elon Musk envisions a Twitter that can more than treble its income and user population by 2028 while reducing its reliance on advertising, according to a leaked presentation deck obtained by the New York Times on May 6. According to the papers, Musk believes he can generate financial growth unlike any other time in the company’s history.

According to the numbers: According to the New York Times, Musk’s aims are as follows:

Increase yearly income to $26.4 billion by 2028, up from $5 billion the previous year. Reach approximately 1 billion people. Musk wants 600 million users by 2025, up to 217 million last year, and 931 million by 2028.

Ad revenue should account for 50% of total revenue. (According to the New York Times, advertising accounted for almost 90% of income in 2020.)

What is the price to enter twitter stocks according to charts?

Chart 1 shows that Twitter’s stock price has fluctuated between $44 and $53 since Elon Musk stated he would buy the company for $54.20/share. The volume profile indicator shows that this is the most heavily traded range in the last 3 months. In fact, Twitter’s share price was $47.96, which is the highest volume traded on Friday. This suggests that buying and selling volume is equally strong and neither the bulls nor the bears currently have the upper hand. 

However, chart 2 tells a different story when you apply the technical analysis indicators to the chart. The dead cross on the 4 indicators from technical analysis, namely the Wells Wilder Smoothing indicator, the Random Walk Index indicator, the Elder Fisher Transform indicator and the Elder Ray indicator, clearly show that the chart has turned slightly bearish, which is not visible to the naked eye. All the dead crosses took place yesterday, May 9 itself, suggesting that this is the best time to short the stocks. These advanced indicators are freely available for Shareschart users. 

Chart 3 shows that the price has also broken through some short-term moving averages of between 3 and 15 days. Since this is a first and clear break of the moving average in the uptrend of the last 3 weeks, the bearish cross should be respected. In technical analysis, people like to use different moving averages to determine the strength of the trend as well as the trend reversal signal as this is one of the most reliable techniques.

At the same time, Twitter has just formed a triangle chart pattern, as you can see on Chart 4. Although a triangle chart pattern can be both a bullish and bearish formation, the technical analysis indicators have all shown that it is likely a bearish chart pattern, as explained above.

If this is a bearish triangle chart pattern, the downside price target will be $41.11, as shown in Chart 5. The price target is derived by measuring the value from the highest point and the lowest point of the triangle and projecting downward from the triangle breakout point. This can be done using the Shareschart Fibonacci tool.

Another way to target the downside target of Twitter stock is to use the Fibonacci retracement method. This is done by measuring the value from the top to the bottom of the recent trend, as shown in Chart 6. The 50% retracement value is $43.40, and the 61.8% retracement value is $40.8.

Chart 7 shows that the 100% triangle projection target price of $41.11 is very close to the 61.8% Fibonacci retracement level of $40.80. Thus, Twitter’s downside target is at least $41.

In case Twitter’s price breaks out of the triangle and turns up, we should place the stop loss level at the recent high of $54.57 (see Chart 8). So, with a downside target of $41, the risk-reward ratio is around 100, which is considered decent. Given the bearish signal from the indicators and a risk-reward ratio of at least 100, this is a good opportunity for a short trade.