TWLO Stock: Textbook Trend Reversal
It’s crazy that for what seems like the longest time, the markets were quietly staging a progressive advance. This move toward higher index values was characterized by low volatility, and on January 30, 2018, all that came to an end. The markets are now characterized by high volatility, and large daily swings seem to be the norm. When comparing this price action to the price action that preceded it, it may seem like quite a chaotic environment, but I happen to prefer it because this environment helps separate good investments from the poor ones.
In a chaotic environment like this one, it is difficult for investments to gain traction, and this is why, in a highly volatile environment, stocks have a tendency to gravitate toward lower prices. As a result, I take great exception when I find stocks doing the exact opposite.
Twilio Inc (NYSE:TWLO) stock has been one of those investments that have caught my eye recently because it has been performing extremely well. For example, since February 8, 2018, TWLO stock has appreciated by 56.13%. The performance alone is very compelling, but there is something else occurring on the company’s stock chart that has really piqued my interest. Over the last couple of days, a technical price pattern was completed on the Twilio stock chart and its implications now suggest that much higher TWLO stock prices are likely in development.
If you’ve been following my work, this is the same pattern I said I was watching in a report titled “Twilio Stock Is Moments Away from a New Bullish Trend,” that was published on February 19, 2018.
This completed technical price pattern is highlighted on the following Twilio stock chart.
Chart courtesy of StockCharts.com
The pattern annotated on the TWLO stock chart is a channel, and it is a simple pattern characterized by a static level of price resistance and a static level of price support. These levels of price support and price resistance contain the stock price, and as a result, it just oscillates in between the two. Over time, the channel price pattern is created.
This channel was characterized by resistance at $35.00 and support at $25.00, which represents the two horizontal trend lines that define this pattern. The current focus is on the trend line that represents resistance. This price point has been very significant, and the sheer number of times that it has prevented the TWLO stock price from advancing beyond it is a testament to this notion.
On March 1, 2018, TWLO stock broke above this level of price resistance, breaking out of the channel and suggesting that higher prices are likely to follow.
The breakout is also suggesting that the pattern on the TWLO stock chart is actually an “ending channel.” An ending channel is a technical price pattern that develops at the end of the trend, and its completion implies that a trend reversal has taken place. The trend that preceded this channel was bearish in nature, and if Twilio stock is no longer bearish, then it must be bullish, and as the pattern suggests, a new bull market is now in development.
This notion of higher stock prices is being reinforced by a very influential momentum indicator, which is highlighted on the following Twilio stock chart.
Chart courtesy of StockCharts.com
The technical indicator highlighted on the TWLO stock chart is the moving average convergence/divergence (MACD) indicator.
MACD is a very influential indicator that is used to determine whether bullish or bearish momentum is influencing the price action in a stock. The reason why this indicator is so influential is because a stock cannot sustain an advance or a decline unless the applicable momentum is supporting it.
The completion of the channel was preceded by a bullish MACD cross. This indication was already suggesting that Twilio stock was geared for higher prices, which is why the breakout that just occurred was not the least bit surprising. My report that was published a few weeks ago is a testament to this notion.
The complete technical price pattern and the bullish MACD cross are coinciding indications that suggest and support the notion that TWLO is now destined for higher prices, because a new bullish trend support by bullish momentum is now in development.
I am bullish on Twilio stock because the completed technical price pattern is suggesting that a new bull market is now in development. This notion of a new bull market and higher TWLO stock prices is being supported by the influential MACD momentum indicator.