With the way I trade most of my stocks are depressed and under $10. Rarely does a setup present itself in a company who is actively talked about on CNBC, Bloomberg, and other outlets. With the dropoff Twitter (TWTR) had the other week it is at a very good spot for a buy. If it drops even lower then feel even better about purchasing it. Because what I am about to show you is that the exit is set and isn’t moving. At the time of this writing Twitter was at $31.85.
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Twitter and the Plunge
From July 25 – 30th Twitter (TWTR) went from $44.22 per share to $31.38.
Here is the reason why: Motley Fool’s Analysis
Here is another article: Seeking Alpha’s Analysis
I glance at the news before making a purchase to double check that the stock isn’t going towards bankruptcy anytime soon. That is the extent of using fundamentals and news for trading. My trading is 99% technical based on Fibonacci extensions and retracements.
Time to Buy
As you can see Twitter (TWTR) has had a huge plunge the past couple of weeks. I have a new trading setup I discovered that has become my main trade I am taking. It usually works out much faster than the Bread-and-Butter trade and the draw-down isn’t as nearly as significant. I’ll talk about it in another post. In this post it is the setup I have been and am currently using. The initial name I have for it is “The 200” but I’m not sure if that will be the final name.
Here you can see how the drop went straight through a bunch of Fibonacci extension levels. For the time being it has settled on the 261% extension level. What is important is that as price went through the 127%, 143%, 161%, and 200% levels that it never retraced back to one of those levels. When I write the post explaining the trade I will talk about why that is important because then the trade would be over and we wouldn’t be looking to get in.
The exit is just below the 161% Fibonacci extension level at $37.50. I marked it with the magenta line. When price comes back and hits that level then the trade is complete. Currently I am long at $32.82. I will probably start buying some more around $27.00 but I am not sure yet. It just depends how the stock keeps on going lower. For sure I would buy more around $22.00. The exit at $37.50 will not move. You could get greedy and leave your exit on the 161% Fibonacci extension at $37.65 but I have no problem coming up a little short. This ensures my exit gets filled.
“Options” To Consider
Overall I feel great about this trade. Even if price continues to go lower I will continue to purchase more. If I had a lot more money to trade than I currently do then I would be selling puts. I have done it with much cheaper stocks that I was looking at getting long and didn’t care if the put was exercised because I was looking to buy it anyways. Even if it didn’t then I would still collect the premium in the worst case scenario.
Or if you were able to purchase 100 shares you could sell a call to lower your average cost basis. You can sell the call two or more dollars from your purchase price. This ensures a little profit from the shares and then collect the premium as well if you get called out. But if price continues to go lower then you pocket the premium.
Those are just some other factors to consider if you have a large account to trade with. I am currently selling puts on certain stocks that fit my price range when I am looking to go long at a certain level.
Conclusion
I am currently long Twitter and will add more if the price continues to go lower as stated above. All of this is not financial advice or investment advice. This is my own opinion and is how I am currently trading. Act upon it at your own risk if you wish.
P.S. – If this post benefits you and if you haven’t used Robinhood for trading stocks (they don’t offer forex) but are thinking to then please consider using my referral link when you do sign up: http://share.robinhood.com/evanc203.
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My Robinhood Review: https://evancarthey.com/review-robinhood-trading-service-with-no-fees-part-1/
