Twitter Inc (TWTR) Stock Takes a Dive on Earnings

Advertisement

The blue bird flies, the blue bird dies. That, friends, is the tale of Twitter Inc (NYSE:TWTR) shares for the past two years. This morning’s earnings-induced dump is simply the latest turn in a drawn-out drama that has left bulls and bears exhausted. TWTR stock is a stinker.

Twitter Inc (TWTR) Stock Takes a Dive on Earnings

Source: Shutterstock

Twitter shares are off 13% in morning trading on the heels of a disappointing second-quarter earnings release. The company bested analysts’ expectations for revenue and earnings, but its lackluster monthly active user growth has summoned the bears’ wrath.

From a technical standpoint, Twitter is a hot mess. And that’s putting it politely.

With this morning’s return below $17.50, TWTR is officially approaching where it started in January 2016. For all the bluster — the buyout rumors, the earnings disappointments and all the rest — the social media stock hasn’t gone anywhere.

As a precursor to any charting analysis, I usually tell readers that Twitter deserves a Surgeon General’s warning that trading it could be bad for your portfolio’s health — not to mention your emotional health as you grapple with the randomness of its price action.

TWTR stock’s trendless nature renders moving averages moot. So my typical reading of the 20-day, 50-day, and 200-day moving averages isn’t near as useful this time. Suffice it to say, today’s price gap carried the stock back below the 50-day and 20-day MA’s, reversing all of the gains acquired during its summer rally.

Source: OptionsAnalytix

I think the best approach here is to key off of a few potential support levels and then use options to increase your odds of success. The $16.50 zone halted Twitter’s prior sell-off in June, so buyers may step-up to defend it once more.

The TWTR Stock Trade

If you’re willing to buy Twitter shares near $16 you could sell the Sep $16 puts for 36 cents. This strategy sets up a potential win-win. If the stock sits above $16 at expiration, then you get to keep the 36 cents. That may not sound like a lot, but the original margin requirement for this naked put should only be around $390, so you’re looking at a potential 9% return with a high probability of success.

If the stock sits below $16, you will be obligated to buy shares at a cost basis of $15.64. That is near the lower end of its two-year range, so may not be a bad price to begin building a long position.

As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.

For a free trial to the best trading community on the planet and Tyler’s current home, click here!


Article printed from InvestorPlace Media, https://investorplace.com/2017/07/twitter-inc-twtr-stock-earnings/.

©2024 InvestorPlace Media, LLC