TWLO Stock: The Trigger That Will Confirm a Bottom Is in Place
I have been watching Twilio Inc (NYSE:TWLO) stock for some time, and late last year, I started looking for indications that would signal that the stock has finally put in a bottom. A bottom would serve to suggest that TWLO stock has finally found its footing, and therefore it is ready to stage a bullish advance.
The reason why I am focusing on Twilio stock at this moment is because there have been a number of developments on the company’s stock chart that are beginning to suggest that a bottom is forming.
If this is your first time reading my work, let me clarify quickly the methodology I use to generate my views on an investment. I use technical analysis as the basis of my investment analysis. This method is predicated on using historical price and volume data found on the company’s stock chart to forecast what the future may bring. Technical analysis is predicated on trends, which are fueled by momentum, and it is the reason why the saying “the trend is your friend” is so prominent.
The price action, since late last year, is beginning to trace out a bottom formation. This formation is highlighted on the following Twilio stock chart.
Chart courtesy of StockCharts.com
The reason why I believe that a bottoming formation is being put in on the TWLO stock chart is because a clear level of price resistance has emerged. This level of price resistance is defined by connecting the peaks on the stock chart, and its significance is magnified by the stock’s inability to trade above it.
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I have highlighted this level of price resistance as “the line in the sand” because when Twilio stock close above this level, it will indicate that a bottom has been put in, and higher stock prices are expected to prevail.
This line in the sand has been tested on numerous occasions, and every time the bulls stage an advance, they chip away at this significant level of price resistance. On August 8, the stock price attempted to breach this level, and right off the bat it seemed as though resistance was going to fall, but unfortunately, TWLO stock was unable to a hang on to the gains that were established earlier in the day.
I would not be surprised to see this level of price resistance fall on the next attempt. This bullish belief is based on underlying indicators, which are positioning themselves for a bullish outcome.
These underlying indicators are highlighted on the following Twilio stock chart.
Chart courtesy of StockCharts.com
This stock chart illustrates TWLO stock’s last attempt at breaking beyond the line in the sand. This attempt, which was created off the lows that were generated in May of this year, have been quite orderly. This orderly trend consisted of higher highs and higher lows, and is easily captured using an ascending channel.
An ascending channel is created using two upward-sloping trend lines that represent levels of price support and price resistance. The theory behind this pattern states that as long as the stock price is oscillating within it, then it can only be presumed that the trend towards higher stock prices is set to continue.
The latest attempt at beaching resistance caused the stock price to break above the 200-day simple moving average (SMA). This simple moving average acts like a dividing line that is used to distinguish between a healthy bullish investment and an unhealthy bearish investment. TWLO shares are trading above this moving average, implying that this investment is healthy once again, and a bullish trend is in development.
The latest attempt is also causing the 50-day simple moving average and the 200-day simple moving average to converge. Once these moving averages cross, it will generate an indicator called a golden cross. A golden cross suggests that a bull market is in development because it indicates that momentum is supporting the notion of higher stock prices.
The underlying indications are turning bullish, while the TWLO stock price continues to trade within the ascending channel, suggesting that another attempt at the line in the sand can be expected. A close above $34.00 would confirm that a bottom is in place, and bullish implications will follow.
A bottoming formation is developing on the TWLO stock chart. Once this formation is complete, it will serve to suggest that higher Twilio stock prices are set to prevail. A number of indications that will support this view are swinging into bullish alignment, and a sustained break above a significant level of price resistance labeled as “the line in the sand” will confirm it.