The rumor, Insider Selling, employee share allocation program, and momentum divergences, bots, MAU's, strong dollar, ER, FB , just to name a few are some of the ingredients of this broth that will boil down on the 28th.
1. The rumor. Last quarter it had a good performance, so FB , Since Twitter has been in a consolidating range since its we expected after the last ER to go back to the lower around the 40's, but suddenly the rumor of an acquisition spread and it made a lot of buyers to blindly jump on the premise of "Buy the rumor Sell the news", a natural reaction, but also a trap. Big announcement are made after hours, not during market hours. Few even questioned it by the numbers, Google wouldn't pay for the Market Cap and debt of Twitter, so there was no real financial possibility there. However, this created a lot of "Hope trading"
2. Insider sale. Recently Twitter had to "Freeze" the insider sale since this has been creating a bad public image for those who read the reports. First question, why are the insiders selling now when it is supposed to go higher? Why not to wait after ER? Currently insider ownership is at 1.40% and the insider transactions is at -44.97% http://finviz.com/quote.ashx?t=twtr
3. Employee Purchase Plan. According to SEC On March 2, 2015, Twitter allocated 38.6 Million Shares at 48.68 of common for incentive plan and employee purchase plan, which is a wise move considering the peak it reached with the rumor and the fact that this won't be volatile for a while.
4. The validity of the "Rumor" was questioned and suddenly the community stopped the crazy run of buying, The started to decline, but those who had already bought decided to keep it, not based of facts, but on hope. Beware of low , this last jump created a momentum divergence on low . So no institutional buying, just hope traders.
5. Peak and Fade. There have been peaks towards 52, which seems to be a magic number where suddenly sellers jump and dump the price. Who are selling on those peaks? And the schema has been a peak and fade, very similar to that of Penny .
6. Periscope. Twitter made two important announcements, first the "new" front page for non twitter users and the acquisition of Periscope. The first one is supposed to attract those users who don't have a Twitter account, and it's nice, but in the inside there is absolutely no change. Only the facade changed, not the interiors, which seems like make up only. On the second announcement periscope still has Meerkat as a competitor for a market share.
7. Facebook reported and it declined, this gives us a red flag since FB is the leader of the social media group and we can expect that something bigger than FB or TWTR is going on in the market. The correlation between FB and TWTR is strong, so they are in a "follow the leader race", they have been in sync more times than they haven't. Facebook declined, we can expect Twitter to decline too.
8. Twitter Comparison. Twitter has a long way to go in the social media group. Compared with others, it performed at -20%, which puts it at the bottom of the comparison.
9. ER Reschedule. Originally the ER date was scheduled for May 5th, and it was rescheduled for Apr 28th, why did they change it after the rumor cooled down? ... Interesting.
10. The Monthly Active Users (MAU) and the Bots. This is one of the main concerns. Twitter has the MAU as its main performance metric, they display bigger MAU numbers as growth of potential users, but looking deeper into this metric, something weird comes up, how to accurately segregate Human MAU's from Bot MAU's. Ads are for human, advertisers are not interested in having Bots reading their ads. Twitter blamed Apple for
10. The Monthly Active Users (MAU) and the Bots. This is one of the main concerns. Twitter has the MAU as its main performance metric, they display bigger MAU numbers as growth of potential users, but looking deeper into this metric, something weird comes up, how to accurately segregate Human MAU's from Bot MAU's. Ads are for human, advertisers are not interested in having Bots reading their ads. Twitter blamed Apple for the loss of 4 million MAU's after a "glitch" on the software that disconnected users not using the application, so that was not exactly a MAU after all.
11. Abuse and MAU's. Companies who promote their own products with twitter adding no value nor paying ads through the regular channels, celebrities inflating their number of followers or governments creating bots to derail a trending topic are some of the MAU's that so far I have not seen Twitter to energetically and decisively eradicate. They'll have to do it with more than a user policy to give the MAU credibility.
12. What's next. Twitter will have to provide outstanding numbers to exit the consolidation triangle or it will be going down to its magnetic $40 level. Almost 34% of its profit value comes from international ads, with a strong dollar and a declining FB, this raises a red flag. Besides Twitter has to monetize the 100M paid for Periscope, and these numbers are still not clear.
While we wait for the ER, let's look at the count down of the Big Bong Clock ... https://twitter.com/big_ben_clock