Twitter Inc TWTR 1.14% shares are up 2.1 percent in the past five trading days in what has become a familiar pattern for traders ahead of the company’s quarterly earnings reports. Twitter is expected to release Q1 earnings before the market open Wednesday, and the market is once again taking a bullish stance on Twitter ahead of the release.
Historical Performances
In three of the last four quarters, Twitter shares have rallied in the final days before earnings are released. This week’s 2.1 percent gain is in line with the average return for the stock in the week headed into its past four earnings reports. Unfortunately, that positive momentum headed into earnings hasn’t carried over.
Twitter shares have tanked following three of its last four earnings reports, averaging a 10.6 percent one-day decline in that time.
Ironically, Twitter has actually met or beat earnings expectations in each of the past 13 quarters. However, traders are much more concerned with growth numbers such as revenue and monthly active users (MAUs).
In The Now
Twitter’s pre-earnings rally and subsequent sell-off is likely due to two prominent market dynamics. First, Twitter is a popular stock among short sellers. According to shortsqueeze.com, Twitter currently has a short percent of float of 11.3 percent with 5.4 days to cover. Short sellers likely cover some or all of their positions ahead of earnings to limit risk from a strong quarter.
In addition, Twitter bulls see…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
