The Best Way to Trade Twitter Stock Today

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TWTR - The Best Way to Trade Twitter Stock Today

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Summer doldrums got you in a funk? Worry not. There is strength in stocks if you know where to look. One of the shining stars amid an otherwise dark market is Twitter (NASDAQ:TWTR). The blue bird’s resurrection has been a sight to behold, glorious in its ascension.

Year-to-date, TWTR is now up 85%, which beats the Nasdaq’s 8.7% gain by a country mile.

The uptrend turned on rocket boosters from mid-May to mid-June scoring perhaps the best upswing we’ve seen in Twitter since its public debut in 2013. Momentum indicators from the RSI to MACD entered the stratosphere confirming TWTR’s newfound strength.

When stocks become overbought one of two corrections usually strikes — price or time. A price correction drives the stock lower as sellers take control for a spell. A time correction brings consolidation, which allows moving averages to play catch-up. The former delivers a buy-the-dip opportunity and the latter creates a breakout setup.

How to Trade Twitter Stock on the Latest Dip

Source: OptionsAnalytix

Sometimes we see characteristics of both form. Like right now with Twitter. A mild pullback and the passage of time is creating a classic bull flag. This pausing pattern suggests buyers are still well in control and merely taking a breather. With the 20-day moving average now caught back up, the time for bulls to regain the upper hand is nigh.

The TWTR Trade

Implied volatility for Twitter stock options just ramped to 52% suggesting premiums are once again ripe for the selling. Couple that with the stock’s relatively low price tag and I think selling puts is an attractive play here.

Sell the Aug $37 put for around $1.00. Consider it a bet that TWTR will sit atop $37 at expiration. If it does, the max reward of $1.00 will be yours to keep. By selling the put, you are obligating yourself to buy shares at a cost basis of $36 if the put sits in-the-money at expiration.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.


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