Market Overview

The After-Hours Twitter Trades That Preceded Friday's Plunge

The After-Hours Twitter Trades That Preceded Friday's Plunge

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

We explain the deep details of after-hours and premarket trading on PreMarket Prep, and co-host Dennis Dick does almost all of his trading in these sessions. 

During these sessions, there is much less algorithmic and high-frequency trading due to lower liquidity at certain times.

Following Twitter Inc's (NYSE: TWTR) third-quarter report Thursday, a big trader or firm showed a huge offer at $54 and stopped the rally dead in its tracks. 

The Twitter Set-Up: After Snap Inc's (NYSE: SNAP) big beat last week and Pinterest Inc (NYSE: PINS) big beat on Thursday, the expectations for Twitter’s report were high. 

In other words, after Twitter rallied off both of their reports, the company would have to blow it away for the rally to continue — and it did not.

Keep in mind that Twitter had a modest rally off Snap’s beat, but added nearly $4 off Pinterest report ($48.53 to $52.43).  That put the issue at its highest level since it peaked in October 2014 at $55.99.

Twitter's Q3 Report: After the close Thursday, Twitter reported a third-quarter EPS miss of a penny and a sales beat of $159.09 million. 

The company reported third-quarter average daily active users of 187 million, up from 145 million one year ago. Yet Twitter reported its smallest daily active user growth since 2017.

Twitter's After-Hours Price Action: On many occasions and especially after an earnings release, traders do not show much size as they attempt to interpret new information. 

This was not the case with Twitter.  After the initial reaction to the report was up, a large trader/investor showed a 100,000 offer at $54. 

Of course, it is impossible to determine if the offer was for real, but when it bounced off the offer the first time, co-host Dennis Dick decided to lean on the order and short Twitter at $53.80 when it came back up.

In the event the offer started to get lifted, he would attempt to cover his short with a 15-cent loss, which is incredible risk management, especially in these volatile markets.

“There is no way someone is going to take out that order,” Dick said on Friday's show. 

"The first time at it, they pecked away, and then it went down to $50. When it came back up the second time, I figured it would and threw out a short at $53.80 and leaned on the big order for an exit." 

The Corresponding Twitter Price Action: That huge seller had it right. Whether or not they continued to sell, everyone else did.

By the conclusion of the after-hours session at 8 p.m. Thursday, the issue had swooned to $43.34. 

The bloodbath continued in the regular session. Twitter dipped below $41 at one point and ended Friday's session down 21.11% at $41.36.

That marks the lowest level for the issue since Sept. 22, when it bottomed at $40.37. 

The full discussion on the issue from today’s show can be found here:




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