TWLO Stock: Bullish from the Start
Twilio Inc (NYSE:TWLO) stock has only been trading on a public exchange for three months. Is it rare that I would focus on company with such a short history, because my analysis is pegged on using price charts to analyse trends. I am making an exception here because, although the time frame is small, the trading is action is compelling and constructive.
Twilio stock first went public in June, and from day one, the bullish price action began. In short order, a bullish trend has developed. Trends and patterns are the basis of my systematic approach to investing, and I use these tools effectively to manage my trades.
I also like TWLO stock because it is a new issue. Names like this tend to have a much lower following and, as result, there is less research available. The saturation in retail portfolios is usually at a minimum. I see this as an opportunity to get into a name before it is fully saturated and known by retail investors. Some see these positions as high-risk, while others see them as hidden treasures. It really depends on ones perspective.
The following chart illustrates the bullish trend in TWLO stock.
Chart courtesy of StockCharts.com
Twilio stock is an uptrend that is bound by an ascending channel. There are two parallel lines that define this bullish trend. These two trend lines define the upper and lower bounds and reflect support and resistance levels. The share price oscillates between these two lines for as long as this trend permits. Both trend lines carry a positive slope so, as time progresses, both support and resistance levels continue to rise.
The moving average convergence divergence (MACD) indicator, located on the lower panel of the above chart, is a simple and effective trend-following momentum indicator. Signal line crossings are used to distinguish between bullish and bearish signals. This indicator is converging, and a bullish MACD cross can generate in the days ahead. A bullish cross would signal that bullish momentum is outweighing bearish momentum, and that the bulls are now in full control of TWLO stock.
TWLO stock is bouncing off support as the MACD indicator is about to confirm a bullish momentum bias. The pattern and signal would constitute that TWLO stock has a high probability that the next move is higher, and a test of the resistance line bound by the channel is not out of the question.
The following Twilio stock chart illustrates the pattern that reaffirms my bullish bias.
Chart courtesy of StockCharts.com
The chart above illustrates the bullish price action on an intraday basis using a one-hour scale. The price action is very bullish and the waves highlighted on the chart support this view. Healthy bullish price action is defined by impulse waves that are followed up by consolidation waves. The consolidation waves allow the new price some time to settle as the new range is digested and allows any overbought conditions to alleviate. Consolidation waves are the stepping stones toward a new impulse leg.
These patterns are of great benefit because they allow me to set a price objective as well as manage my risk. My risk is managed using the ascending channel, and thus a break below support would be a reason to exit the trade. That would also coincide with of a break below the consolidation wave. The bullish price objective of this pattern is $78.00, which represents a return of 21.2% from current levels. It is difficult to gauge if this target price aligns with overhead resistance because the scaling on the Twilio stock chart is not yet available. Either way, the path of least resistance is toward higher prices.
The Bottom Line on Twilio Stock
I am bullish on TWLO stock and my premise is solely based on the price chart. My bias will remain bullish for as long as the channel remains intact. A break below the lower support line would be reason for concern and a change of view on Twilio stock.