Trade of the Day: Twitter (TWTR)

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Today, we’re opening a new bearish trade on Twitter (TWTR). With all of the selling on Wall Street during the past week, many stocks have been brought down from their recent highs to more realistic valuations. Unfortunately for Twitter, the stock is still overvalued, and we believe it has more room to fall.

As much as many investors hoped it would be, Twitter is no Facebook (FB) — a stock that is also seeing downward price pressure. The limited functionality of Twitter’s platform has been a barrier both for sustained user growth and engagement and for increased ad-revenue generation. While the company is desperately trying to address these issues, traders on Wall Street no longer have the luxury of waiting for it to happen while the stock sits at an inflated earnings multiple.

While Twitter certainly has the potential of dropping back to its recent low of $21.01 in the coming weeks, we are setting our sights a little higher in establishing our first price target. We anticipate that $24 will serve as a strong near-term support level. We’ll evaluate what to do next with the trade once we reach that level.

‘Buy to open’ the Twitter October 24 Puts (TWTR151016P00024000) for a maximum price of $2.00.

Also, we’re continuing to hold the Visa (V) calls.  V was hit hard following the market’s selloff. However, consumer spending is strong, and we expect V to bounce off support and head higher in the near term.

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.

You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in their Advanced Technical Analysis Program.


Article printed from InvestorPlace Media, https://investorplace.com/2015/08/trade-of-the-day-twitter-twtr-2/.

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