Twitter (TWTR), the social media phenomenon, just reported its first earnings as a publicly traded company … and as illustrated by the swoon in TWTR stock, didn’t do so well.
Twitter earnings of 2 cents per share beat an estimated loss of 2 cents, and revenues of $242.7 million also topped the consensus, which was for $217.8 million. TWTR also issued 2014 guidance of $1.15 billion to $1.20 billion to beat the previously estimated $1.13 billion, and the company also enjoyed increased advertising engagement.
However, the performance of TWTR stock was driven by the company’s lousy user growth numbers. Twitter had around 240 million users in the quarter that ended in December, which was up less than 4% from the previous three months and the lowest growth figure yet. Of course, those numbers have implications for potential ad revenue and the entire growth story of the company, which is why TWTR stock took such a big beating this morning. Twitter shares were down more than 20% as of this writing.
The last time I discussed the charts of TWTR stock (Dec. 30), Twitter had just meaningfully fallen from its all-time high on the previous trading day, and I highlighted some immediate-term support levels for quicker traders to focus around. Although TWTR did have a few bounce attempts since, it never really showed any real strength worth committing to.
Now that Twitter looks a lot uglier today, brokers that do their “best” working in hindsight are now downgrading the stock … even though TWTR stock gave traders plenty of warnings in prior weeks.
From a psychological point of view, this is the first real test for TWTR stock, and thus for its shareholders. How badly they will fold ’em has yet to be seen, but on the charts there is one very straightforward area of support that needs to hold for the bulls to have any chance in coming weeks. That area lies just around the $52 mark, and represents the 61.8% Fibonacci retracement level of the entire November-December rally.
Very simply put, a daily close below there will mean that Twitter stock likely won’t offer new trades on the long side anymore for some time, and needs to find itself and further consolidate.
On the other hand, if TWTR can keep it together above this level, it could develop buying opportunities again quicker.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities