Citron and Twitter: A Social Match Made in Heaven

Shares of Twitter, Inc. were off by more than 8% today, as Citron Research came out with a rather bold and visible call for the stock to drop down to $25, after hitting recent highs of $36.80 earlier this month. Citron actually went so far as to say that of all the social plays beyond Facebook, Twitter was actually the most vulnerable to a looming privacy regulation crackdown from the Senate. 

Be that as it may, let us revisit the fact that TWTR has been as resilient as any prominent, household-name's stock in the market outside of AMZN BKNG NFLX SQ and a few others in recent months. TWTR gapped up strongly after earnings in early-February and barely looked back, pushing on higher and forming a rather benign consolidation pattern during last week's broad market selling. 

In fact, that earnings gap is still unfilled, down to $27.08 as illustrated by the horizontal light blue line on TWTR's daily chart, below. Moreover, TWTR is only now testing its 50-day moving average (dark blue line) for the first time since late-January, which is a perfectly normal phenomenon for a stock even in a strong uptrend. While a complete gap-fill may not be a very pleasant experience for longs, it still would  not kill the bull technical case, either. 

Thus, even though the user data privacy issue is a legitimate concern, TWTR has not suffered much technical damage, if any, beyond a sharp headline-driven pullback today. It is also worth remembering that cooler heads may prevail: It is free to sign up for a Twitter account and there has to be some reasonable expectation of not only targeted advertising but also of basic user data demographics, within reason, being used by TWTR to increase profits. You get what you pay for, so to speak. 

Either way, when the dust settles I see no reason to doubt TWTR's long-term turnaround case, a bull thesis we have held inside the VIP arm of Market Chess Subscription Services for more than a year now, since the stock was a teenager.