Could the Bottom in Twitter Come Today?
The capital markets generally move in the direction that will cause the most number of investors the greatest amount of pain. Investors who purchased Twitter near its all-time highs have experienced that phenomenon, as they watched the stock price tumble from $75 dollar per share down to $39 per share. Earnings have missed expectations for two consecutive quarter, which does not bode well for long term investors.
A six-month lock-up on 480 million Twitter (NYSE:TWTR) shares is due to expire Monday, releasing for trading over four times the amount of stock that is already available. The increased supply of shares could add to the 39% drop that the stock price has suffered this year, although major investors who own at least 205 million shares combined plan to hold on to their interests. These include private-equity firm Benchmark, and co-founders Evan Williams and Jack Dorsey.
Traders have pushed the stock lower and are poised for a liquidation that will take the stock down potentially even lower with an eye on its IPO price of $29 per share. Once this next round of liquidation is complete, will the stock be a buy?
The stock has a robust advertising platform in place, and a solid framework for producing revenues. The price to earnings is still off the charts, and the recent breakdown below trend line support is ominous.
Resistance on Twitter is seen near $40, while support is the IPO price of $29. Momentum on the stock has turned negative with the MACD (moving average convergence divergence) index generating a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The index moved from positive to negative territory confirming the sell signal. Investors who are interested in this stock, should continue to wait for the dust to settle before jumping in.
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