What’s the newest sport in the trading game? Twitter (TWTR). Let me explain. (July 08, 2016)
TWTR
In this Free Chart video I want to look at Twitter ( NYSE:TWTR ). Here’s why: It’s working. This thing has been in a death spiral for so long it gives spirals a bad name. This really, really has been crushed. BUT, since this February low, and I think that was THE low, you’ve got a double bottom, and now the stock is moving higher. There are a few different points that I would like to make on that. First of all, there’s the low, $14.00. During this base building process, and certainly when this stock was pushing up against the 50-day moving average, and then even a push a little bit above that, you can be buying this stock. And your thesis is, “Hey, as long as this stock stays above the 50-day moving average, or certainly stays above this support line, then I’m getting in on the bottom. If the stock falls back below that support line, then I want to be out.”
So you take whatever number of shares works for you, such that if the stock had fallen back (it’s too late to be doing this now, I’ll show you what to do now in a minute), but you’re buying lower than if you’d put your put your stop in at 13.95, something like that. Then you look and say, “Okay, how many dollars am I willing to lose on any given trade?” And you should have a number, that given your trading account you will risk no more than X dollars. Whether it’s 100.00 or 100,000.00, just have your number. And then whatever that number of dollars is, then divide that by the difference between where your purchase price is and where the stop is, and that’s the number of shares that you should be buying.
Okay so that’s when the stock is down lower, starting to push up. But not that the stock is moving higher we want to look at a few things. First of all, do we think it can continue to go? And I would say, yes. There are a couple things here, right around $20.00 or so (which is still 10 percent higher than it is now, even a little bit more) is the 200-day moving average. So that’s a bit of an issue. But there are some fundamental things that are happening here. The big news was a while ago Twitter ( NYSE:TWTR ) got the NFL to agree to allow them to stream some videos. They’re paying for that content, they paid 10 million for it, right? Okay, Facebook ( NASDAQ:FB ) offered more, but they said, “No thanks Zuck, we’re going with Twitter. You guys are too cheap.” And they are. So they paid 10 million and they have sold 50 million dollars in adds. That’s a pretty nice return on investment. Now they are talking to the NBA and soccer as well. They are talking to the NETWORKS that are broadcasting these things.
So the bottom line is, you are starting to see kind of a sea-change in how people are looking at Twitter ( NYSE:TWTR ). I still look at it as, inhabited by a lot of people who have an overestimation of the number of people who are really interested in what they think. But that’s just me. I probably fall into that category too. But the idea is that these media outlets, these media companies, these producers like these sport franchises are looking at Twitter ( NYSE:TWTR ). And you know how this is, it will have a snowball effect. It’s probably more likely that Twitter ( NYSE:TWTR ) is going to get other franchises.
So I think that is one of the reasons why this stock is moving up. But also, just that it has broken a downtrend and sometimes stocks do what they do just because that’s what they do. So you stick with the trend, you use this type of a trendline, and keep a trailing stop all the way up. As the stock moves higher the trailing stop gets higher. And don’t forget about the fact on the 26th of this month the company reports earnings. And I would say this, if the stock is up at 21.00 or $23.00 before they report earnings, you need to sell before they report earnings. On the other hand, if for whatever reason, the stock rolls over, and it’s down here, I think you need to buy before earnings.
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