Digital World Acquisition Corp Stock News: DWAC drops 5% with broad market

• DWAC up more than 28% on Wednesday.
• Digital World Acquisition Corp is a SPAC merging with Donald Trump's new social media startup.
• DWAC stock has broken through resistance at $65.

Digital World Acquisition Corp (DWAC) is down about 5% near $60 in the first hour of Thursday's session after gaining more than 16% on Tuesday and 28% on Wednesday. The mid-week rally was due to renewed interest in the stock after the announcement that California Congressman Devin Nunes is leaving Congress to become CEO of Donald Trump's new media startup. DWAC is the Special Purpose Acquisition Company (SPAC) that has an agreement to merge with Trump Media & Technology Group (TMTG), which owns TRUTH Social.

Digital World Acquisition Corp (DWAC) Stock News: A minor pullback

US indices opened slightly lower after a robust three-day rally started the week off on solid footing. As such, many meme stocks like DWAC are also succumbing to the wait-and-see approach. The market has noticed the lowest number of US applications for new unemployment benefits in 52 years but is not sure what to make of it. The holiday season may be distorting the number. If it is accurate, heavier demand may lead to more inflation as the shipping backlog is yet to abate.

DWAC investors benefited early in the week from the announcement that Devin Nunes (R-CA), a Trump diehard during the former president's single term, will become the first CEO of Trump Media & Technology Group (TMTG). TMTG is the corporate parent that owns the as-of-yet launched social media company TRUTH Social.

News of TMTG's planned Private Investment in Public Equity (PIPE) deal has not hurt the DWAC share price one bit. This PIPE deal would sell $1 billion worth of shares to institutional investors who would otherwise not invest in a pre-product company that is currently just a powerpoint. The catch is that they are allowed to buy the shares at a 40% discount to the current market price in most cases.

PIPE investors are then permitted to immediately sell them back to retail investors at the market price once the merger is complete. Having purchased them at a 40% discount may of course make them willing to part with the shares for a much lower price.

Digital World Acquisition Corp (DWAC) Stock Forecast: Breaking resistance at $65

Despite the pullback on Thursday, traders who rode out this week's rally should be optimistic after DWAC stock pierced the $65 resistance level on Wednesday.

From Wednesday: "Bulls may want to wait until DWAC shares close above $60. This area up to $65 saw a lot of steady resistance in early to mid-November. Closing above $65 is the especially bullish signal. Additionally, waiting for the 9-day to cross above the 20-day moving average is another signal to hold out for. This will ensure that DWAC's current share price is not just forming another lower high."

With a close at $65.42 on Wednesday, the signal to turn bullish is here. Though the stock primarily benefits from being in the news, DWAC price action is demonstrating that the tide may have turned and the decline of the last month and a half has come to an end. The 9-day and 20-day moving averages are also moving into closer proximity, which means the 9-day could yet cross over in a bullish signal this month. The next target is the supply zone between $70 and $75.

DWAC could pull back to collect more liquidity at $52 before another move higher. Longer-term support remains at $38.

FXStreet View: Breaking the $65 level was key. Buy on the pullback this week or next. There is more popping to go.

DWAC 1-day chart