Five Reasons Why I Would Never Buy Twitter Today
1) The stock will not have an Average True Range (ATR). I use the stock's volatility to determine how many shares to trade, so without this key missing ingredient, I do not know how much to buy.
2) I would not know where to place my stops. I place a stop 2X the ATR below my entry price, so without the ATR I cannot optimally place my stop loss.
It is true that many traders use percentages to place their stop losses. This is, to be fair, much better than nothing, but it is sub-optimal. For example, a 7% stop loss for a blue chip stock like IBM is totally different from a 7% stop loss on an ultra ETF like NUGT. Thinking in terms of volatility makes everything an apples to apples comparison.
3) There is no short term trend. I need the 20 day moving average to be above the 50 day moving average, as a minimum, for me to consider a stock.
4) There is no long term trend. When I buy a stock, the long term trend should be up.
5) I wouldn't know where to take profits. I generally ride a stock higher as long as it stays above its 20 day moving average, however the stock is too new to have formed that.
The bottom line is that it is impossible to technically analyze or trend follow a stock like Twitter. When I buy a stock, I need to have an edge, but with a stock like this, it's really just pure gambling.