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The Bear Case in Twitter Stock Looks Like Yesterday’s News

Chris Tyler

The latest bearish swipe at Twitter (NYSE:TWTR) wasn’t entirely fake news. But it does share the social media platform’s ongoing proliferation of rehashed, fear-mongering reports by detracting from Twitter stock’s real message of better days ahead. Let me explain.

The Bear Case in Twitter Stock Looks Like Yesterday’s News

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Investment boutique MoffettNathanson struck fear into the wallets of some TWTR investors yesterday as the firm warned of the company’s “extreme valuation.” But the shot across the bow responsible for Twitter stock’s drop of 3.07% was mostly old news. My advice is investors need to stay calm and ready to buy shares as opportunity awaits around the corner.

For anyone that follows TWTR stock, Nathanson’s sell recommendation is a well-worn grudge against Twitter. The fact is Thursday’s warning was a reiteration and not their first against Twitter shares either.

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The firm did lower its price target from a below-the-market $28 to $25 and expects Twitter stock’s next earnings report next month will disappoint, citing the higher costs associated with defending the integrity of Twitter’s social media platform and TWTR has difficult growth comparisons.

More to the point, “the news” in Twitter stock was more or less old and mostly known information already available to investors. I’d go so far as to say Nathanson’s attack is similar to a new variation of malicious bot armies found by researchers from Recorded Future in Sweden.

The data sleuths have found new slanderous fake accounts busy dredging up old alarmist stories meant to scare people for a second or third time on the Twitter platform. And in this case, given Nathanson’s steadfast bearish views and rummaging of similarly worn-sounding material on Twitter stock, the news is trying to undermine investors from buying shares in the days ahead at opportunistic prices.

Twitter Stock Price Chart


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On the price chart it has been a good year for TWTR bulls. Shares are up roughly 29%. It has also proven to be a very technically constructive one as well. Earlier this year, Twitter stock managed to invalidate a bearish-looking head-and-shoulders continuation pattern and reaffirm that strength with April’s earnings-driven breakout to relative highs.

More recently, Twitter stock has improved its chances for continued upside price action by establishing a pivot low that filled the earnings gap while confirming an uptrend in shares. The bottom also found support in-between the 38% and 50% retracement levels. However, while the situation looks bullish, at current prices I would caution investors from buying TWTR today.

TWTR’s rally off this critical low has resulted in an overbought stochastics condition. And a handful of days into a pullback following a failure to produce a new high within the trend, means some restraint makes sense.

My recommendation is investors try and pick up Twitter stock on a bit of additional price weakness as it develops another daily chart pivot low. This strategy allows a purchase as shares move nearer to technical support or at a minimum, help ease TWTR’s stochastics reading. Ultimately, I’m bullish on Twitter, but there’s no rush to buy shares just yet.

Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

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