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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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    Dec 26, 2013 1:44 PM | about stocks: TWTR, FB

    It's a holiday session with low volume, but there remains an upside bias as conditions in the economy generally look favorable going into 2014. The Dow is up for a sixth day in a row, well into new-high territory. And by the way, the Nasdaq has been on fire this year, up nearly 40%. Of course it's not at record high levels because those were set during the tech bubble but it is way up there now to values last seen in 2000.

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    And then there's Twitter (NYSE:TWTR), which snubbed the Nasdaq for the NYSE but it's something the tech world has kept an eye on. The stock continues to surge, up another ~5% today to above $73. As a reminder, the company's IPO price was set at $23, and closed just below $45 on its first day of trading. It's been a massive gain and far more positively received than Facebook's (NASDAQ:FB) calamity of an IPO, but on the other hand the company is worth $40 billion now, valuing it at 71x sales and 46x book and one has wondering if it's being set-up to get burned at these levels.

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    We did get one bit of economic data in weekly initial jobless claims, but this time of year with the holidays and related seasonal adjustments, I tend to take it mostly with a grain of salt. New claims hit 338K for the week ended December 21, which was just below the 340K consensus estimate and down from the 380K result the previous week. That said, recent readings have been a little more elevated in general, so the four-week moving average is up three weeks in a row. Claims activity has also trended somewhat contrary to the latest employment numbers, with the unemployment rate having fallen from 7.3% to 7.0% in November. In the past, jobless claims have generally trended with the unemployment rate and so far December's jobless claims haven't been panning out. But as we said, the holidays and seasonal adjustments can skew the numbers this time of year.

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    There's an adage that says "the trend is your friend," and in cases like this, sometimes is best to join the herd and reap the benefits. But with that said, you always want to have an eye on the fundamentals and to make sure they match up. Currently the fundamentals match-up and economic data has been supportive, while valuations are certainly not at 'bubble' prices so the coast is seemingly clear until we get negative news that suggests otherwise.


    Stocks: TWTR, FB
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