Twitter (TWTR) is arguably the most revolutionary and unique social media tools out there – and it seems like their growth is just starting. Management issues and a few blunders have kept this stock down, but it certainly sports a heavy valuation. With that said, Twitter is one of the most interesting trades and has been since it went public over a year ago, offering great two-way action (no surprise since volatility is high with so much uncertainty in the markets and world).
We have scooped up Twitter options several times with mixed results. There are always rumors out there when it comes to Twitter, from whether they should dump their current CEO, buy a major company, or put themselves up for sale. Recently, activist investors have made waves talking about what could be next for unlocking shareholder value.
This brings us to the Twitter chart, which exposes some interesting action that may carry forward. We see the potential formation of a bullish W pattern on the right side of the chart; if confirmed, this could take the price up to the $50 area. Since last January, the stock is up over 12%, better than most tech names. Its relative strength shows how this stock continues to beat the rest of the names.
We are long on the February 40 calls and looking for more upside.
Resistance is clearly heavy above that 40 mark, where volume spiked back in early December. A Twitter earnings report is coming up soon, and that could be the catalyst to take the stock higher. We have seen some unusually high option volume, which indicates that there is some big money coming after Twitter – and that money is looking for a big move in either direction. With a potential change at the top, it could bring some interesting speculation (and higher stock prices) to the fore.