Chart courtesy of Stockcharts.com
As we told you earlier, the stock was overpriced. Overpriced stocks are vulnerable to horrific down moves.
That is one big lesson here, but there is more.
The next lesson is that looking at the chart will do you no good until you have looked at the fundamentals. When you look at the fundamentals, you know the stock is overpriced. You know you are tempting fate to stay long, but you should not be long, you should be short if anything, right?
You can take a look at the news, and it tells you that TWTR beat earnings and revenue predictions, but subscriber growth shot TWTR down.
So that lesson is overpriced stocks are vulnerable, even if they exceed earnings and revenue expectations.
The other lesson with regard to IPOs, and this is why short sellers do love them so, is that the smart company goes public when the growth curve starts to slow down.
Growth is the hot button for IPO (and other) stocks. Investors get hypnotized by growth more than any other factor. They buy IPOs that have histories of fast growth and prospects of more of the same.
But as an underwriter, I tell a company not to go public until they can see that the growth is going to slow down. Why share all that tasty growth with the public? So IPO companies, smart ones, often sell at the peak.
Short sellers, smart ones, figure out who is peaking and who will show slowing growth in the after market, and they pick an entry point for their short sale.
At three lessons here: (1) fundamentals over all, (2) technical or chart analysis is worthless without know which way the wind is blowing from looking at the fundamentals, (3) overpriced stocks are easily knocked down, and (4) IPO companies often go public when growth is peaking or at least slowing. OK, that's four lessons, enjoy.
Hope this helps you see the broader picture.
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