TWLO Stock: Bullish Signals
Twilio Inc (NYSE:TWLO) is a cloud-based communications platform company that provides consumer pay-as-you-go applications. The cloud has brought new life to many tech companies, and the enthusiasm behind this sector has created a tailwind that has pushed many of these companies to new highs. It was these tailwinds that helped propel TWLO stock to an all-time high.
Twilio stock had a successful initial public offering (IPO) on June 23, 2016, when its shares first starting trading publicly on the New York Stock Exchange (NYSE). The subscription price was $15.00. Shares opened the day by trading at $23.99 and they closed the day at 28.79. This incredible start continued to please investors, and three months later, TWLO stock hit an all-time high of $70.96.
Twilio stock was off to a good start, and it seems like it was easy cruising ahead as the trend higher seemed solidified. Funny how that is exactly when the wheels fell off the bus and shares went on an unrelenting slide. In six short weeks, TWLO stock hit a low of $30.00, and the gains that investors were applauding in the the previous three months were completely erased. The good news is, I have reason to believe that this sell-off has concluded and that a bounce in Twilio stock is now expected.
The following Twilio stock chart illustrates the trend that initially supported the price.
Chart courtesy of StockCharts.com
The TWLO stock chart above illustrates the trend line that supported the stock as the price went on a impressive run. A trend line is a simple tool, but I could argue that it is one of most important tools in my toolbox. This trend line represents an uptrend, and it is created by connecting the valleys on the price chart. An uptrend is characterized by higher highs and lower lows, and it can be easily seen on a chart as the price moves from the lower left to the upper right.
This trend line serves to define the trend, but it also acts to define the risk. Traders can use this line to accumulate positions as the trend is being tested. But, if the price closes below this trend line, it would be reason for them to exit their positions, as it indicates that the uptrend is broken and a reversal is in play.
On October 10 2016, Twilio stock closed below this trend line, and this event is highlighted as a breakdown on the chart above. It was this breakdown that signaled that a trend reversal was in play, and it alluded to further selling pressure.
The following Twilio stock chart illustrates the signals that are indicating that a trend reversal has initiated.
Chart courtesy of StockCharts.com
The TWLO stock chart above illustrates three distinct signals that are indicating that the bearish pressure has subsided and a bounce is likely.
The first signal comes in the form of a broken downtrend line. This trend line is similar to the uptrend line, but there is a distinct difference. The rule of thumb with regards to trend lines is the the shallower the slope, the more significant the expected reaction. The slope of this downtrend line is great, so a smaller reaction is expected, but it is still significant because it illustrates that the intensity of selling has subsided.
The second signal comes in the form of a bullish moving average convergence/divergence (MACD) cross. MACD is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals. This signal has just crossed on a bullish manner, indicating that the bears have lost momentum and that bulls are now in control of TWLO stock.
The third signal comes in the form of a bullish “buy” signal from the relative strength indicator (RSI). This indicator is an oscillator that traders use to time their entry and exit points, based on levels that are deemed overbought or oversold. When the RSI oscillator crosses below 30, it is deemed oversold. A bullish “buy” signal is generated when the signal crosses back above 30. RSI has just crossed back above 30, indicating that a relief rally is in play.
Bottom Line on Twilio Stock
I am constructively bullish on Twilio stock because I have reason to believe, based on the signals from the TWLO stock chart, that the selling has run its course and that a bounce higher in the price is likely.