Do not blow off this free video. It will help you trade wild swings such as what we saw in Twitter (TWTR). (April 28, 2015)
It’s Twitter ( NYSE:TWTR ) Tuesday. Okay, what do you say about this? The company didn’t tweet earnings early, some research firm or data mining firm tweeted what they thought earnings were, or what they knew earnings were, whatever, it’s going to be a big investigation. This is the kind of crap that really kind of makes you think that maybe there’s some integrity issues in the market.
I’m not making a comment one way or another as far as whether that was legal, what they did or not. Frankly if I’m a research firm, I’m not affiliated with the company I just look at a lot of stuff, I can do whatever the heck I want on Twitter ( NYSE:TWTR ); I can talk my own book, I can do whatever the heck I want to. I would imagine that members, that employees of that company, people that were in the know, they probably shorted the living snot out of Twitter ( NYSE:TWTR ) before that was tweeted.
You can’t even say that that’s inside information, because that’s not inside information if the numbers were the product of their own work. Now, if it was some guy that snaked some documents out the back door or sent an email from his personal email account, well, you know, he better go get a consult with Hillary Clinton and figure out how to fix that. The bottom line is if it was illegal somebody’s going to jail. But it was really just a good opportunity to make some trades because you knew what the issue was.
But you also knew this, if you were shorting this, and there were some folks in the “Stock Market Mentor” forum that were shorting this stock and commenting on it. In fact I think one guy made a post on it before it was even in the news, that it’s an early release, something or other. When you see something like this the first thing you’ve got to ask yourself, actually the first thing that I asked myself was, we’ll watch. When this thing starts trading lower on huge volume like this, down this low in a very short period of time on such massive volume before earnings, you’ve got to say what’s happening.
I know what’s happening, somebody’s not getting out of the stock, its not that, it’s somebody knows what the numbers are and it’s a pretty creditable source. So this stock is going straight in to the crapper. So that’s not right. So ultimately what they’re going to do is they’re going to stop the stock, they’re going to hold it, they’re going to halt trading. So when you’re trading this type of thing, and this was a little bit of a “white knuckler” for me.
I’ll tell you why, because I’m thinking that I posted that in the forum, when are they going to halt trading? Well, for whatever reason, maybe it’s just dumb luck, I decided what the heck, I’ll buy some puts on this thing because if somebody knows something and the earning are this bad on Twitter ( NYSE:TWTR ) wherever I bought these puts, a 4.5 percent move isn’t going to quite cover it, and so sure enough they halt the shares.
Now at this point, you think about it and you’ve got to think about this if you’re trading after hours, this is during market hours, a very, very rare thing, but you’ve got to ask yourself when the stock opens up, where is everybody leaning? Because this is the point, this stock, right now, at this point, this is not trading on fundamentals, this is not trading on what the numbers are, that’s already been done here. This stock has already made that move and that was the dominate thing, like, “What’s their growth, what’s this what’s that, oh that’s not good enough, I’m going to sell.”
So there’s a lot of selling that goes on; at this point you can’t look and see what the numbers were when CNBC starts talking about it. You can look at it and say, “Holy crap they’re bad, the stock’s going lower.” That’s fine, but the stock could go higher, the numbers aren’t what control the action. What controls the action is where are all these folks sitting? Are they profitable or not? Where are all these folks sitting? Are they profitable or not? On the daily chart as well; so suddenly we open up for trading and then the stock falls lower.
At this point, TRULY, the fundamentals don’t matter. Like Herb Greenberg had said, “Guys, don’t give guidance, you’re clueless.” Remember that guy a while back that, I think he was on CNBC, essentially saying that the Twitter guys were pot smokers. Well, move to Denver, the way this stock’s trading and the way their guidance is and all that they probably are smoking pot and it’s probably pretty good stuff. But at this point, when the stock starts trading again and it gaps down this low, you do not want to be leaning on this stock.
If you’re short the stock you need to be covering. Do you know why? Because everybody else is. If you’re long the stock you do not want to be selling. Do you know why? Because everybody else is. You know that this stock has hit an extreme and you’re not looking at the numbers, you’re not sitting there looking at Yahoo Finance, scratching your head wondering whether their number of active users was good or not. Do you really know? I don’t think anybody really knows including management, those guys are totally clueless, tweet that.
So anyway, at this point you are not shorting the stock, frankly you’re kind of nervous, in fact you want to be getting long this stock. You are going to be selling the puts that you bought, and they’re gyrating all around. Just flip an offer out there and hope that you get filled, and sure enough you do, and then look at this and say, “Okay well now I’m seeing this, I’m giving you pearls here on trading fast markets, look at this here on this massive volume and say, “Well golly gee, I wonder if the next move is going to be down?” No! Because the stock has already made that big move, it’s made that move on MASSIVE volume.
The only bigger volume bar you saw was this bar, which is higher still, and look at the stock, it just traded in a range where it closed close to where it opened. In other words, this is where the battle was being raged, right here. Where’s the next candlestick going to go? Is the next candlestick going to go down here? Well then you don’t want to buy this stock, even if it was I still would be reluctant to short it. I would go like you know what, I made my money I’m not being greedy, I’ve done that before, I make a lot of money on a trade, get greedy, turnaround, give it all back.
Don’t do that; that’s what they do in Las Vegas, they keep the whales there until they wind up giving back all the money that they won, and it will happen to you too. So if the stock is going down I’m not selling it; I’m not shorting it, but I’m waiting for a buying opportunity. Well instead the stock’s going up so this is what I’m looking for, 42.00. Sure enough here’s the top, 42.00. All this thing has to do is twitch now, boom! And you want to be long the stock. Why? Oh because the earning weren’t as bad as you thought they were?
No! That has nothing to do with the earnings; it has to do with everybody that’s trading here. You are not trading the stock; of course you’re trading against a bunch of high-frequency trading scumbags, but then I repeat myself. You’re doing that, but what you’re really doing is just trading against other traders leaning the wrong way. So you want to be long the stock, but you’re also aware that it’s now 3:51 and there’s 9 minutes to go before the close and the news disseminates and traders get kind of squared up, you know those that have lost all this money are done going, “Oh crap, I’m out.” And those that are making all the money are done going, “Oh crap I’m out.”
Then you watch the stock settle down and that’s when you close this out. You see these green bars, and by the way, this doesn’t seem like very much there, it’s 5.29 percent; here it’s 2.41 percent. Okay, if you’re buying at $42.00 and you’re selling at the end of this first candlestick on a one-minute chart, that’s a 2.4 percent return, not bad, I’ll do that all day long. And so then finally the stock settles out. But frankly right here was, well here if you got short, but really where the rubber met the road was right in here, right in here when you realized that the stock gapped down; all the folks that are short are taking their profits.
Don’t get them out of their trade by shorting the stock or selling it to them. Take the other side of that trade, you see what’s happening, you know this stock is not going to do this, it’s not going to do that like so many other stocks do because this is not after hours trading; this is real hours trading when everybody’s still at their desk. So you know there’s going to be selling pressure, you know that any bounce is just going to be a snap back based on this big move down and so you don’t get caught up in the fundamentals. You don’t go, “Wee!’ You just buy the stock and then look for the first red candle, sell the stock and then go, “I’m done,” and then you’re out.
That was your Twitter ( NYSE:TWTR ) trade. I hope that this makes sense to you; I think I’ve explained it pretty well. The thing that you’ve got to keep in mind is there’s a time for technicals, there’s a time for fundamentals, and frankly, there’s a time for just looking and determining what’s happening with other traders, and this was one of those times. So we’ll see how this stock trades tomorrow.
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