Chart of the Day – $TWTR – Unfollowed at Key Resistance

by Dan February 13, 2014 3:46 pm • Commentary

TWTR has had a wee bit of volatility since reporting user engagement and growth metrics that disappointed the street last Wednesday, sending the shares down 24% in the following day, closing on the closest thing to long term support the stock has in its short existence at $50.

The one year chart below shows the fairly dramatic turnaround the stock has had in the last 5 trading days, until 10:30am this morning when the stock nearly touched $59, some 18% off of last Thursday’s lows.

TWTR chart since Nov IPO from Bloomberg
TWTR chart since Nov IPO from Bloomberg

The stock kissed its 50 day moving average, consolidated and then Gonzo, caught a seller at about $58.30:

TWTR 1 day chart from Bloomberg
TWTR 1 day chart from Bloomberg

At this point, a logical neat term support level would be about $55 (green line), the level it consolidated above prior to the stock’s parabolic run into year end:

TWTR since Nov IPO from Bloomberg
TWTR since Nov IPO from Bloomberg

With the company’s first quarter as public entity out of the way we would have expected the implied vol (IV) on the stock to come in back towards the lows, but the stock’s volatility since the print has kept it elevated, we see this as a continued opportunity for longs to add yield by selling calls, or for directional strategies that take advantage of the high IV.

TWTR 30 day at the money IV from Bloomberg
TWTR 30 day at the money IV from Bloomberg