Bank BIG Profits as Twitter Inc (TWTR) Stock Takes Flight

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TWTR - Bank BIG Profits as Twitter Inc (TWTR) Stock Takes Flight

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Well, what have we here? The blue bird, long since left for dead, is starting to flutter. Twitter Inc (NYSE:TWTR) shares are soaring 11% on the heels of a solid earnings beat.

There’s nothing like an uptick in money making to breath new life into an ailing stock. I’ll leave the earning analysis to my fellow writers. For our purposes let’s dive into what effect today’s jump had on the technicals of TWTR stock.

And, more specifically, how we can build an options trade to profit.

Twitter stock chart (TWTR)
Click to Enlarge
Source: OptionsAnalytix

For all its fury, today’s jump was insufficient in turning Twitter’s longer-term downtrend. But, hey, Rome wasn’t built in a day, and it will take more than one rousing earnings release to right a ship that has been traveling south as long as Twitter.

Though TWTR stock remains below its 200-day moving average, it did reclaim the high ground in the short run. The stock is now back above the 20- and 50-day moving averages for the first time since early February.

Volume patterns have left little to talk about before today’s surge. The high volume accompanying today’s jump is hardly surprising. Substantial participation always accompanies significant earnings gaps. Time will tell if the enthusiasm sticks, but buyers deserve the benefit of the doubt here.

In eyeing potential upside targets, the $17.15 and $17.55 levels stand out. The former is an unfilled gap created by TWTR stock’s last earnings announcement. The latter is the 200-day moving average, which has a tendency of acting as resistance on a re-test.

The Trade on Twitter Stock

If you’re willing to bet the blue bird continues to soar, consider buying a TWTR Jun $16/$18 bull call spread for 68 cents.

The $2-wide call vertical consists of buying to open the June $16 call while selling to open the June $18 call. The initial cost represents the max loss and will be forfeited if TWTR stock sits below $16 at expiration.

The max reward is $1.32 and will be captured if Twitter sits above $18 at expiration. By risking 68 cents to make $1.32 the potential return is an eye-popping 194%.

As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2017/04/how-to-profit-as-twitter-inc-twtr-stock-takes-flight/.

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