All is not well with the blue bird. Twitter (NASDAQ:TWTR) fell another near-4% yesterday after already suffering a significant slide last week. With bearish evidence mounting, the ailing social media company could be ripe for a short trade. Let’s dissect the setup and identify how to capitalize with Twitter stock options.
The weekly view chronicles the recent rise and fall from grace. In a little over a year, Twitter climbed from a humble $14 to just shy of $50. And then, the lofty expectations met a cold reality when the July earnings release disappointed the Street. Ever since then, the bears have dominated.
Not surprisingly, the post-earnings rebound attempt failed and formed a lower pivot high. Last week’s support break added further insult to injury and TWTR now has little technical reason for optimism.
It’s also now below the 200-day moving average for the first time in over a year. The first downside target based on the weekly time frame is near $26.50 which has acted as both support and resistance in the past.
The daily view adds further significance to this zone because it was a gap area formed by the February earnings jump that eventually filled in April.
Today’s downdraft ended the three-day pause that settled on Twitter stock after last week’s rug pull. I think it’s telling that all TWTR could muster after such a large drop were three measly sideways trading sessions. With a big potential support zone looming a few dollars lower and sellers still very much in control, I think a bear trade is worth consideration.
Bet With Twitter Stock Bears
The high level of volatility in TWTR leaves me a bit leery of buying puts outright. To hedge our bets and reduce the overall cost, let’s build a put spread. Buy the Nov $30 put while selling the Nov $25 put. The $3-wide bear put can be purchased for $1.95. The max reward is $3.05, but you might consider taking profits if we drop toward the $26.50 support zone.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, .
