Trending: #Volatility
01/24/18
Although it may have arguably the highest-profile user on the planet—the current occupant of the White House—Twitter (TWTR) has had its ups and downs. Yes, it’s roughly 330 million average monthly users pale in comparison to Facebook’s 2 billion, but so does the user base of almost every other social media player when compared to the alpha dog. The weekly chart below offers a snapshot of TWTR’s performance almost since it began trading in 2013. 
Twitter (TWTR), 12/16/13 – 1/19/18

Source: OptionsHouse

But that note at the far right of the chart tells another part of TWTR’s more recent story: The high of $25.85 on January 12 was the stock’s loftiest level in more than two years, and represented a 45% rally off the April 2017 low close. Twitter’s Q3 earnings (released in October 2017) caught many market watchers off guard by beating estimates, and among its performance tidbits was the fact that the company grew its daily active user base 14% on a year-over-year basis—only two percentage points behind Facebook’s rate.1 #BackInTheGame.

In the weeks since, the stock has captured more favorable analyst coverage, some of which was based on the argument that Facebook’s decision to alter its news feed would work to Twitter’s advantage, since publishers and businesses getting less play on FB would be inclined to explore other outlets.2

But as has been the case several times over the past few years, the latest TWTR rally was interrupted by a sharp sell-off. What might have been a routine pullback appeared to accelerate amid some tough news: Twitter announced it was notifying nearly 700,000 users in the US who had followed accounts, or shared or liked tweets, from the Russia-linked Internet Research Agency (the epicenter of the 2016 election-meddling fiasco).3 TWTR sold off more than 10% from the January 12 high to Monday’s low—a string of five consecutive lower lows and closes that pushed the stock to a 23-day low:

Twitter (TWTR), 8/14/17 – 1/23/18

Source: OptionsHouse

Then yesterday came the news that Twitter’s COO was leaving the company to take the CEO position at Social Finance (SoFi).4 The stock traded down more than 3% (to the  November swing high) before rallying back to erase the majority of the day’s loss.

Although the stock’s pullback to an obvious support level amid a spate of bad news could be reason to think “oversold,” analyzing variations of the price action as of yesterday—e.g., a 3% daily drop, a string of lower lows and closes, a 20-day (or longer) new low—shows TWTR has tended to follow through on such moves to the downside in the near-term. For example, after a string of three (or more) consecutive days of lower lows and closes where the last day is at least a 20-day low, the stock was down an average of -0.54% four days later (based on 35 examples). However, the stock tended to rebound into positive territory after that.

Twitter (TWTR), 1/22/18 – 1/23/18

Source: OptionsHouse

The five-minute chart above shows yesterday’s rally off the day’s low ran out of steam around the level of the intraday lows from late in the previous day’s session. Although the trading day wasn’t yet over, the stock appeared to be struggling to maintain upside momentum. That might be an additional clue about TWTR’s short-term momentum, but longer-term it remains to be seen whether the stock can build on its six-month upswing.

 

Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on Twitter, @ETRADE, for useful trading and investing insights.


1 Zacks. Better Buy: Facebook (FB) vs. Twitter (TWTR). 1/18/18.

2 Bloomberg. Twitter Analyst Support Piles Up as Turnaround Gains Steam. 1/19/18.

3 San Jose Mercury News. Twitter to notify 677,775 Americans who interacted with Russian-linked accounts. 1/19/18.

4 Tech Crunch. Twitter COO Anthony Noto resigns to become SoFi CEO. 1/23/19.