Talking Numbers - CNBC | Yahoo Finance

Sponsored by
Talking Numbers

Why things may get a lot worse for Twitter

Twitter and Amazon are joining forces to monetize eyeballs.

People will now be able to link their Twitter and Amazon accounts. Should they see something hashtagged #AmazonCart in their Twitter feed, they just have to respond to that tweet and that item will be put into their Amazon cart. How Twitter makes money on the whole deal has yet to be revealed.

But the big news may not be what's for sale on Amazon as much as what's about to go on sale when it comes to Twitter. On Tuesday, insiders will be eligible to sell as many as 480 million Twitter shares, or about 81.6 percent of shares outstanding.

Yet, not all of those shares will hit the market at once, if at all. Twitter's founders Jack Dorsey and Evan Williams said they will be holding onto their shares, as are CEO Dick Costolo and VCs Rizvi Traverse and Benchmark Capital. That accounts for around 205 million shares that won't be for sale.

(Read: Amazon introduces Twitter service)

It seems the market hasn't been waiting to sell off Twitter's stock, though. Since the start of 2014, the microblogging site's shares are down over 40 percent.

View photo

.

Richard Ross, global technical strategist at Auerbach Grayson, sees Twitter's stock going even lower based on its technicals. Ross, a "Talking Numbers” contributor, sees Twitter's stock as traveling on a downward-sloping support line starting a few weeks after it went public in November.

"There is a line of support, but it's pointing in the wrong direction if you're long the stock," said Ross. "It's pointing down and I expect that trend to continue."

Ross notes that Facebook also had an issue when its insiders were eligible to sell shares. "We all sort of hemmed and hawed about that and Facebook went on to hit all-time highs," said Ross. "But, I'm not quite as optimistic on Twitter here."

(Read: Twitter earnings: Can they recover?)

Gina Sanchez, founder of Chantico Global, also doesn't have high hopes. While 205 million shares won't be sold into the market Tuesday, "that still leaves 275 million shares that we have no idea what they're going to do," said Sanchez, a CNBC contributor. Given its current valuation, "I think that a lot of that 275 million--or at least a good portion of that--is going to probably sell into this."

To see the full discussion on Twitter, with Ross on the technicals and Sanchez on the fundamentals, watch the above video.

View Comments (21)