Twitter — Too late to short? Too early to buy? No…and YES! (May 06, 2014)
Discussed in this article: Twitter Inc ( $TWTR )
Let’s go back to Twitter ( NYSE:TWTR ). First of all, and I posted this in the Stock Market Mentor forum today, my bad. The reason I’m saying my bad is, yesterday in the Chart of the Day I said you don’t really want to buy Twitter ( NYSE:TWTR ), it’s not working for you, the insiders are able to sell, this is not a bargain. What I should have been doing is absolutely pounding the table, I can’t look at this 18 percent drop and say, “Hey, golly gee, aren’t I so good, look, I called this move.” I didn’t, I knew it would go down, but I sure didn’t relay that to you in a real money making opportunity, so I apologize for that; I seriously should have been pounding the table, but I wasn’t. However, if you bought the thing today don’t blame me that was your own stupid move.
Now, let’s look at the 5-minute chart, here’s the thing, you could put your finger in the air and know that this was going to be a bear day right away, because this stock gapped down and did not come anywhere near the high of 36.10; the very next one the high was 35.77. At this point this was an awesome short, to just short this stock and let it run. And by the way, as soon as you get off this short, do you sit here and watch every single move? No, you don’t watch every move. You instead look at this and say, “Okay I shorted the stock here; today’s the first day that all these inside shareholders, whatever, could sell.
What was their cost basis, Bob Pisani was pretty clear on this on CNBC this morning, because the average cost basis of insiders is like to $2.00 or $2.50. Do you really think somebody’s not going to sell a stock that they have a cost basis of 2.50 and they’re not going to sell it at $35.00? What kind of fool do you think is going own that stock and say, “I’m going to keep holding it until it gets back to $70.00”? Anybody who’s that stupid, frankly, is not smart enough to have gotten in on Twitter ( NYSE:TWTR ) pre IPO and owned some of those shares, you’re not going to do that.
Now, here’s my sense, I would want to continue to be short Twitter ( NYSE:TWTR ), because this is a one day thing, over 135 million shares traded, most likely a lot of those were actually the same shares back and forth, and back and forth during the day; I just don’t think this selling is over, and when it is over you’re probably going to get a dead cat bounce. This is a broken stock, it’s just broken, it’s kind of been broken for a while, but this was really the bust here. When this thing came down here, created this gap, and it just kept on going, this is a busted stock, you don’t want anywhere near it. Frankly, I went and bought some puts on it today, late in the day, it was actually a spread; but yeah, I still think the stock has more to go to the downside, and if it falls below 30.00, that’s going to be a real problem.