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Stock DWAC: To be on the safe side, it is better to avoid Digital World Acquisition Corp

Digital World Acquisition Corp. (NASDAQ:DWAC) stock a special purpose acquisition company (SPAC) that announced a merger with former President Trump’s media company, Trump Media & Technology Group (TMTG). It fell from almost $10 in October 2021 to $83.73 at the close on February 18, 2022.

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If you think that’s irrational, consider that DWAC stock has a 52-week range of $9.84 to $175.00. At one point, investors who bought stocks at nearly $10 could have sold them for 17.5 times as much, turning a $100,000 investment into $1.75 million, enough to retire in a exotic destination.

I called DWAC stock as a nominee for the theater award if there was one, but apparently the story didn’t agree with me until today. Shares of Digital World Acquisition Corp. straightened up. What is the story behind Trump Media & Technology Group?

DWAC Technical Analysis

Technical analysis of DWAC stocks for me that I mainly start with fundamentals reveals two things. Trying to first discover and time the ultimate high in a stock price is as dangerous as trying to time the ultimate low. A double top, triple top, overbought indicators and other interesting elements support the idea that DWAC stock is overbought and subject to correction, but it is still defying gravity and resisting and moving higher.

Second, no news is good news. Stocks shift to releasing material news, and now the stock market is waiting for updated material news. This will be reflected in the stock chart.

Third, overbought stocks may continue to rise for a considerable time until a dramatic change occurs. Think of home actions as a prime example. They eventually crushed most, if not all of them, but continued to scale to higher levels for so long, transferring wealth from the impatient investors and traders who sorted them out to the irrational ones who kept them as long as the rally was under fire.

If you’re wondering what will move the DWAC stock soon to move to Trump Media & Technology Group, then one clue is smart money. Institutional investors will gradually or suddenly liquidate stocks and leave retail investors wondering what hit them if, of course, they are on the long side.

The big idea behind TMTG is freedom of expression

Trump Media & Technology Group says it will offer no political discrimination and will stand up to Big Tech, fighting content censorship. Being born in the country that gave birth to democracy and the Olympics, I really like that.

I also love the capitalism that Trump Media & Technology will champion while protecting democracy.

Monopoly is the worst form of business ever created for consumers. This leads to high prices without other alternative products. Why should a tech monopoly be a good idea? After all, Twitter (NYSE:TWTR) and Metaplatforms (NASDAQ:Facebook) banned former President Trump from posting content.

I also find it funny that in his presentation, Trump Media & Technology Group mentions that Twitter maintained the Taliban account while banning the US President. Is there now a business opportunity for Trump Media & Technology Group to disrupt the FAANG social media monopoly?

The bullish case is built on Trump’s massive social media followers and Trump Media & Technology Group presentation ideology that caters to a liberal, independent, and conservative audience. A “big tent” philosophy for free and open discussions.

Trump Media & Technology Group estimates that in 2026 it will generate $3.6 billion in revenue. That’s a big step up from estimated earnings of just $1 million in 2022.

The essential

An interesting article on CNN evokes a series of risks, legal and financial for Trump. Their development is critical because it should directly impact the actions of TMTG.

From a valuation perspective, it’s too hard to justify the stock price and market capitalization. There could be a stock dilution soon and now the fundamentals are non-existent, only projections exist by TMTG.

To be on the safe side now, it’s best to avoid DWAC stock. Yes, it is flirting with bubble territory, but it remains very volatile. Let the smart money decide its way. We know the logical outcome, but we don’t know the timing.

As of the date of publication, Stavros Georgiadis, CFA does not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to Publication guidelines.

Stavros Georgiadis is a CFA charter holder, equity research analyst and economist. He focuses on US stocks and has his own stock market blog. He has written various articles for other publications in the past and can be contacted at Twitter and on LinkedIn.


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