TWTR EARNINGS PREVIEW:
Reports after the close tomorrow. Fundamentally it looks okay, I will score it at 7 to 8 out of 10. Since Twitter went public on November 7, 2013, it has reported twice, beat earnings and revenue both times, yet the stock price declined after the reports. This was due to the market not liking the number of active users. I guess user growth wasn't good enough. This means that if it can show increased activity (as well as good earnings), we could see a huge jump in the stock price. The World Cup might have helped it get over that hurdle with increased global activity. This has not been factored into earnings expectations. So we could see a jump in earnings, revenue and user growth for Q2. If there was ever a time to be bullish the stock going into earnings, this is it. If it can't put up a show now, I don't know what other global opportunity it will have.
On the technical side, it is more bullish than bearish. There is also a lot of room for the upside since it is about 50% off its highs.
So, based on the fundamentals and technicals, I believe it will make a huge move up after it reports. I will buy November Call options going into earnings. I would have preferred October options but they are not available at this time. September options will be too risky if the trade goes against me. Note that my intention is to hold for just one day, but no more than a few days. So I am buying this far out just for risk management. A way of getting my money back if the trade goes against me.
I believe the market is ready to push it higher given that it got punished twice in the past even after reporting good results.
There is also a psychological trade to look out for. If the result is too good, we could see a big gap up on Wednesday that is immediately followed by a sell-off as the market digests the results. When the market realizes that the World Cup is not played every year, it will likely start dropping until it gets to the point whereby the market thinks it has overreacted by dropping. At that point it will start going back up on the expectation that people will maintain their accounts because of some new "additions" (if any) the company has made to "attract" users.
So, if it goes my way (gap up on Wednesday), I will close the play if it closes any candlestick below 5ema on the 15min chart, then buy Put options when it confirms below the 5ema. I will then close the Put options when it moves back above 10 or 20ema, whether it happens the same day or in a few days.
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