Time to Bet on TWTR Stock's Next Leg Higher

Options traders have been put-heavy towards Twitter stock in recent weeks

Managing Editor
Mar 29, 2018 at 11:05 AM
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Shares of social media concern Twitter Inc (NYSE:TWTR) notched a two-year high of $36.80 on March 14, but have since pulled back to test their rising 80-day moving average. If past is precedent, it could be time to bet on TWTR's next leg higher, as previous retreats to this trendline have had bullish implications for the stock.

Daily Chart of TWTR Since March with 80MA

According to Schaeffer's Senior Quantitative Analyst Rocky White, there have been three other times in the past three years that Twitter stock has come within one standard deviation of its 80-day trendline, after a lengthy stretch above this moving average. Afterwards, TWTR went on to average a five-day gain of 9.91%, and a one-month gain of 20.5%.

Twitter stock was last seen 0.8% higher at $28.70. A 9.91% rally from current levels would put the shares around $30.99, and a 20.5% gain would have TWTR around $33.98.

In the options pits, traders have been leaning towards the bears' camp in recent weeks, with data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) showing TWTR with a 10-day put/call volume ratio of 0.56, ranking in the 99th percentile of its annual range. This indicates a healthier-than-usual appetite for puts over calls of late.

Echoing this, Twitter stock's Schaeffer's put/call open interest ratio (SOIR) of 0.68 ranks in the 81st annual percentile. This elevated ranking shows put open interest in contracts expiring within three months is much higher than normal compared to call open interest.

Lastly, the stock has a Schaeffer's Volatility Scorecard (SVS) of 92. This shows TWTR has tended to make outsized moves over the last 12 months, relative to what the options market has expected.

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