• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

I'm Not Adding to This Dip in Twitter - Here's Why

There is at least a case to be made for breaking up big tech. TWTR isn't in that position.
By STEPHEN GUILFOYLE
Jan 11, 2021 | 11:00 AM EST
Stocks quotes in this article: TWTR, FB, SNAP, AMZN, AAPL, GOOGL, MCD

Is Twitter (TWTR)  done? Good question. More broadly, is big change about to come to social media in particular? Or to big tech more broadly. It all starts last Wednesday when a group of pro-Trump protesters crossed the line between protest and riot, when they invaded the U.S. Capitol Building and became violent. Many point out that the president had led them to this point and that he may have even incited the crowd to become more aggressive when he addressed the crowd when it was still a protest. No one will deny that the various groups that met in Washington that day coordinated to some degree through social media.

The quick response came from Twitter and Facebook (FB) , as the two had become this president's (Twitter especially) way to communicate with his base. Since then, Snap (SNAP) and Redditt have taken similar steps, and then the likes of Amazon (AMZN) , Apple (AAPL) , and Alphabet (GOOGL) all took the further step to boot a Twitter competitor, the much smaller Parler from either their app stores, or from using their web hosting services. Parler, for those who are unaware, is very much like Twitter in design, but had become a retreat of sorts for conservatives who felt that their free speech was being shut down at the more mainstream social media sites.

The broader problem for the tech giants is that in depriving Parler of even competing for eyeballs they come very close to proving the government's antitrust claims against them. It is said that some of those who committed crimes last Wednesday coordinated on Parler. I have no idea if that is true. If so, some kind of policing would have needed to be done, but to disable smaller competition from taking the field is the very essence of monopoly or oligopoly. There is a problem here. I had opened a Parler account. I found there to be very little interaction on the site, and felt that it might just die on the vine due to lack of interest. Twitter I use for business purposes, and Facebook is where I stay in touch with folks that might have at other times in history, left my life forever.

The Problem

I noticed on Sunday that I had lost a few hundred followers on Twitter. I am not a big deal on Twitter, though I do participate. I currently have 11K plus followers and have never sought the "blue checkmark" as I always felt that non-celebrities that bear that mark seem a little ridiculous. I checked on a friend who has twice as many followers. He had just posted that he was down 500 followers. Checked on a much more famous follower, a well known author. He was down 8K followers. I thought maybe Twitter was purging the bots as they do from time to time.

I have a good number of Facebook friends that represent both sides of the aisle. I posted on Facebook... "Something going on at Twitter, They're either culling the herd or people are leaving." Within seconds, two Facebook friends "apologized" for being part of my loss of followers as they had cancelled their Twitter accounts. Then, a text from a friend who goes all the way back to my paper hat wearing days at McDonald's (MCD) . He had apparently closed both his Facebook and Twitter accounts. Said he was done with what he referred to as the political bias on those sites.

This is a bigger problem for Twitter than for Facebook. Facebook will still be the home of high school friendships kept alive, Instagram will remain popular. President Trump's personal account had 88 million followers on Twitter. There are more widely followed celebrities, but 88 million is still roughly half of Twitter's number of total average daily users. I have no way to measure, but it's probably safe to say that President Trump drove more engagement - negative and positive - per tweet than close to anyone else. As a lightning rod of division, he was an asset to Twitter, and probably the reason why Twitter's share price soared in 2017 and then held onto most of those gains over the next three years.

The Chart

I see Twitter's chart as quite bearish. Let me explain.

What we have here is a cup that spans late October through mid-December. When a cup adds a handle, we know that the pivot becomes the peak of the right side of the cup, right gang? Should no handle develop, you can still have a breakout, but the pivot remains the peak of the left side of that cup. The pivot here would be a rough $53. The ensuing breakout failed as December turned into January. What are our basic rules for target prices and panic points sans news events or other mitigating factors? Anyone? We look to take out earlier profits up 20% to 25%, and we admit we were wrong -7% to -8%. This simple disciplined approach enforces patience with winners, while discouraging patience with losers. It's effective.

Now, our first target price based on a $53 pivot would be $64. The panic point, however, would be $48. The shares have obviously pierced that level this morning on the news of the weekend. Another fairly strong negative would be how easily TWTR smashed through the 590 day SMA at $48.38. The only reason I see to finesse one's way out of this name, if already long, is that a gap has been created, and readers all know that I feel that there is almost always at some point an attempt to fill these gaps. This stock may waffle its way back into the $48 to $50 range. Anything better than that is gravy.

In short, I am not adding to this dip. As for big tech, there is at least a case to be made for breaking up those firms, and breaking up those firms may very well create shareholder value. Twitter is not in that position.

(FB, AMZN, AAPL, and GOOGL are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Stephen Guilfoyle was Long AMZN, AAPL equity.

TAGS: Investing | Markets | Stocks | Technical Analysis | Trading | Media | Technology

More from Investing

Beyond Meat May Simmer Down After Its Latest Rally

Bruce Kamich
Jan 15, 2021 12:56 PM EST

Has Thursday's rally made a significant change to the charts?

I Find Draganfly's Connection to American Airlines Intriguing

Timothy Collins
Jan 15, 2021 12:29 PM EST

Drones are set to become a bigger and bigger part of the commercial world and our day-to-day lives.

GameStop's Charts Show Us More Risk Than Reward

Bruce Kamich
Jan 15, 2021 12:04 PM EST

Let's check and see what clues we can glean from the charts and indicators.

An Undervalued Stock Yielding Over 6%

Bob Ciura
Jan 15, 2021 12:00 PM EST

With a high yield of 6.4%, this is an attractive stock for income investors.

Twitter Shares Are Just Plain Overvalued

Jim Collins
Jan 15, 2021 11:45 AM EST

Here's where Jack Dorsey's ship will start to sink.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 09:01 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    When it's time to sell, will you act or freeze?
  • 08:35 AM EST GARY BERMAN

    Wednesday Morning Fibocall for 1/13/2021

    Lower highs... SPX (Long-Term View) The 1/8/2...
  • 08:07 AM EST GARY BERMAN

    Tuesday Morning Fibocall for 1/12/2021

    Watch if the recent trend of lower highs continues...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login