Don't Miss This Twitter Stock Buy Signal

Twitter Inc (NYSE:TWTR) was down nearly 10% on Monday on news the microblogging site removed more than 70 million fake accounts. The stock eventually pared this loss to 5.4%, after TWTR's Chief Financial Officer Ned Segal said in a tweet the suspension of these accounts would not impact user metrics. Today, the shares are down 0.1% to trade at $43.97, but Summit Insights said to buy the dip -- and one options signal suggests TWTR could be headed for a big bounce.

Specifically, TWTR recently popped up on a study run by Schaeffer's Senior Quantitative Analyst Rocky White of stocks trading within 2% of its 52-week high, while simultaneously having a Schaeffer's Volatility Index (SVI) that was ranked in the lower fifth percentile of its annual range. At the end of last week, Twitter was within a chip-shot of its June 15 three-year high of $47.79, while its SVI of 42.6% was ranked in the 16th annual percentile.

In the last three times this signal has flashed, TWTR went on to average a one-month gain of 7.88%, with two-thirds of those returns positive. While another move of this magnitude from current levels would put the security back near its recent high, the shares could be due for an even bigger rally, given Monday's loss.

Regardless, a shift in sentiment could also draw buyers to the table of one of the newest S&P 500 stocks. Despite the social media stock's nearly 84% year-to-date gain, 21 of 29 analysts still maintain a "hold" or worse rating. Plus, the average 12-month price target of $32.52 is a 26.4% discount to current trading levels.

And with TWTR holding above technical support in the $42-$44 region -- home to its pre-bull gap levels from June, as well as its 20- and 30-day moving averages -- a capitulation from some of the weaker bearish hands could create tailwinds. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.39 ranks in the 75th annual percentile, meaning puts have been bought to open relative to calls at a quicker-than-usual clip.