Twitter Inc (NYSE:TWTR) rallied hard off its early April lows near $27, eventually topping out at a three-year high of $47.79 in mid-June. The stock has pulled back sharply since then, and after last Thursday's 4.4% plunge following reports that Fox News was boycotting Twitter, is once again testing its 320-day moving average. This could mark an attractive buying opportunity, considering previous pullbacks to here have had bullish implications.
Specifically, in the three other times TWTR has come within one standard deviation of this trendline after a significant stretch above it, the stock has averaged a five-day gain of 5.95%, with two-thirds of those returns positive. Another move of this magnitude would put Twitter shares back near $34.50 by early next week.
Options traders, meanwhile, have been betting on bigger losses for TWTR stock in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 0.54 ranks in the 85th annual percentile. While this shows calls have outpaced puts on an absolute basis, the high percentile ranking indicates the rate of put buying relative to call buying has been quicker than usual.
There's plenty of pessimism priced into the shares elsewhere on Wall Street. While 20 of the 27 analysts covering Twitter stock maintain a "hold" or worse rating, the average 12-month price target of $34.45 is a slim 5.8% premium to current trading levels.
And while short interest plunged 13.8% in the past two reporting periods, there are still 45.76 million shares sold short. This is well above the early April low of 26.33 million shares, and represents a healthy 6.4% of TWTR stock's available float, or roughly two times the average daily pace of trading.