Trade of the Day: Twitter Inc (TWTR)

Advertisement

We’ve opened a new bearish trade on Twitter Inc (TWTR). It turns out that the “dead cat” that bounced after TWTR’s less-than-stellar earnings announcement in February had a bird in its mouth…a tiny blue bird.

TWTR surprised everyone when it bounced as high as it did following its lowered guidance for the first quarter. Analysts had been expecting first-quarter revenue of $629 million, but management guided lower at $595-$610 million. Sure, the company had beaten its previous-quarter earnings estimates by $0.04 per share, but that was in the past.

Plus, the company’s monthly active users (MAU) remained flat at 320 million, which was also disappointing. So why did TWTR bounce? It looks like it was lifted higher by the same short squeeze that helped lift the rest of the market. More than 8% of TWTR’s available float is held short, and those traders were feeling the pressure last month.

However, we think the short squeeze is over, and TWTR is ready to resume its longer-term downtrend. Facebook (FB) continues to dominate mobile advertising, with companies like Snapchat picking up steam. TWTR, on the other hand, is stagnating.

Many hoped Jack Dorsey would be able to turn things around when he came back, but that hope is quickly fading. Things have gotten so bad that the company announced last week that it would be enhancing its employee compensation packages to try and retain its top talent, many of whom are leaving for more successful companies.

We see TWTR dropping back down toward its mid-February lows around $14 in the short term.

‘Buy to open’ the TWTR April 15 Puts (TWTR160415P00015000) for a maximum price of $0.60.

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.

To receive further instructions on this trade, get in on the next SlingShot Trader trade and receive 1 free month today by clicking here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/03/trade-of-the-day-twitter-twtr-3/.

©2024 InvestorPlace Media, LLC