Password Glitch Could Be a Buying Opportunity for TWTR Stock

Twitter stock tends to rally off its 80-day moving average

Emma Duncan
May 4, 2018 at 10:31 AM
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Social media name Twitter Inc (NYSE:TWTR) is trading lower this morning, after the company urged all 330 million users to change their passwords after a system glitch. Twitter stock was last seen down 1.9% at $30.09. However, TWTR's pullback to a key trendline could present a buying opportunity for bulls, if recent history is any indicator.

Overall, the social media concern has gained 86% over the past nine months, and touched a two-year high of $36.80 on March 14. However, since that peak -- and after a poorly received earnings report-- TWTR is now trading within one standard deviation of its 80-day moving average. Following the last four pullbacks to this trendline, Twitter stock was higher one month later 75% of the time, averaging a healthy gain of 17.33%, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

twitter stock chart

In the option pits, traders have been more bearish than normal in recent weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security with a 10-day put/call volume ratio of 0.49, ranking in the 92nd annual percentile. While the low absolute ratio indicates more calls than puts bought to open, the high percentile suggests accelerated put buying over call buying lately.

Echoing that is Twitter's Schaeffer's put/call open interest ratio (SOIR). The stock currently sports a ratio of 0.72, which ranks in the 92nd percentile of its annual range. Though the ratio indicates that short-term calls still outnumber puts on an absolute basis, the elevated percentile indicates that near-term traders have rarely shown a greater preference for puts over calls in the last year.

Also worth noting is TWTR's Schaeffer's Volatility Scorecard (SVS) of 96 out of 100. This lofty ranking means the equity has tended to register bigger price swings than its options premiums have priced in over the past 12 months.


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