Trade This Rare Move in Twitter Inc (TWTR) Stock

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The price action in Twitter Inc (NYSE:TWTR) has hot mess written all over it. Choppy? Yes. Sloppy? Certainly. Consistently inconsistent? You know it. It’s no wonder trend traders have long since written TWTR off for its inability to, well, trend. But despite all its flaws, I think the current pullback is a buy and here’s why.

For evidence of the blue bird’s inability to kickstart a lengthy trend, look no further than the 200-day moving average. It’s flatter than a pancake. Chart watchers use this smoothing mechanism as an indication of the long-term trend.

The sideways slithering confirms that despite numerous attempts to fly (and die), TWTR has been altogether unable to escape its range-bound prison. And that makes it one frustrating stock for trades with a long time horizon.

But that doesn’t mean we haven’t seen some decent short-term trends materialize. Let’s just say Twitter’s prison has been quite large. With resistance near $20.50 and support near $15, that leaves plenty of room for the stock to meander. And tactical traders have had enough volatility to try to game.


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Source: OptionsAnalytix

Since bottoming in early-August, TWTR entered an uptrend that just increased in momentum on its last ascent. It also started to fill the substantial earnings gap from late-July. And with the stock now back above the 50-day moving average, bullish trades may be worth a shot.

Further elevating the appeal is the recent pullback which carried the stock back to a potential support level. This provides a potential low-risk entry for spectators looking to enter the game.

The TWTR Stock Option Trade

Like most other stocks these days, Twitter carries a low implied volatility. And that suggests long option plays are the way to go. Buy the Nov 17 calls for $1.50. The risk is limited to the initial cost of $1.50, but you can minimize the damage by exiting if TWTR falls below $17.

I suggest waiting for a break of Thursday’s high ($17.65) before entering the trade. This will confirm the stock has pivoted higher.

As of this writing, Tyler Craig held no positions 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.

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