This Strategist Explains Why Not To Buy Bounces In Twitter
T3 Trading Group Chief Strategist Scott Redler said that he expects resistance to slow any further bounce in Twitter Inc (NYSE: TWTR).
Redler pointed to the 21-day moving average, currently at $36.05, which may constrain the price. Twitter broke below that price following its last earnings report, which saw the price decline from $51.66 to close at $42.27 the following day. Since then, shares have been under pressure.
For short-term traders that were long Twitter on its failed move below $34.31, Redler recommended they "trim some" of their position. Calling Twitter a "broken name," Redler suggested that traders sell rallies in the stock, particularly if they entered looking for an "oversold bounce."
Longer term, however, Redler said that someone will monetize Twitter in the right way, but said that could be either another company or a good CEO. Speculation continues to mount on any sell-off that Twitter is a takeover target, particularly from Google Inc (NASDAQ: GOOG). Last week, speculation grew that Twitter could even be worth $100 million to the tech giant- compared with a market cap of $23.5 billion.
Redler said that, from personal experience, Twitter is a great marketing platform that allows him to reach "like-minded individuals." He added, "If [Twitter] charged $3 per person, most people would pay rather than leave Twitter." Personally, he thinks it would be harder to go without Twitter than without Facebook Inc (NASDAQ: FB).
Year-to-date, Twitter has declined just 0.9 percent, though prices have been extremely volatile. At its highest, Twitter gained more than 45 percent from December 31, 2014. The stock has traded more than 3 percent below that watermark before the most recent bounce.
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