Saturday, December 13, 2014

$TWTR A paradise for speculators a hell for investors

If you bought TWTR close to the IPO chances are you paid around ~ 40 a piece to have the illusion that suddenly your investment made an amazing 73% in 40 days just to find later that the price tanked below the IPO price. People found a great "Buy Opportunity" when it crossed above its IPO price again on July to have the illusion that it would fly high, but, yes you're right the big But, it's back again to its 40 ish level. So for those IPO investors bad news, your money made happy a lot of speculators by changing hands and you (probably) only have a big Thank You ! (if not a big loss)
What to expect now? Even though the "junk debt rating" news was aired, I'm surprised it didn't tank below the 40 level and today the post-market reads 39.89, so not a huge drop after the announcement, and since the indicators are starting to rotate to the upside, just by looking at them and ignoring the news the rating and all the head games, they say we can expect another leg to the upside. Just trading, not investing.
I will be cautious and I'll wait for the signal confirmation before jumping to a trade here.

$TWTR - A paradise for speculators a hell for investors -


Twitter made its debut as an IPO in the NY Stock Market under the symbol $TWTR, the entry to it was extremely risky, anything could happen since as an IPO there is no previous performance history, so whatever the numbers are, there is no correlation with a previous experience with the stock.  The chart above (courtesy of  displays its performance on a minute by minute basis as it was put to the market on its first day of trading.  Several interesting facts come to my attention.

There is an initial rally that started right at the open, it made the price jump from 45 to 50 in 15 minutes, it means 11% in 15 minutes.  It then dropped to 44.  That was not short selling, since an IPO can't be short sold right of the bat. It was just pure speculation from the initial move. A similar strategy used in penny stocks, a huge peak of greed followed by a drop. Those who win are the very first initial buyers. There is no way to beat that manually, those are algos in action.   

Personally I don't like to trade IPO's, after the Facebook ($FB) experience on its IPO it's better to wait and see, because you'll never know if the initial offering price is overvalued. It is better and safer to wait on the sidelines and see where the trend is going after having confirmation of the indicators once they're able to gather enough data history.