Here’s how I dissect the chart on Twilio (TWLO). (May 15, 2019)


Twillio ( NYSE: TWLO ); I like this stock. I actually still like it here and this is why: Let’s just kind of walk through this and we will do a little surgery. The stock had been holding along the 50-day moving average, that’s good price action. It traded down below it but then it recovered, that’s a good thing.

The stock held here, a nice move higher; still kind of squeezing, waiting and waiting, and then earnings really quick. The company reports earnings, the stock gaps up and immediately craps like this. That’s not a good thing, it makes the stock really heavy; the days go by. The next day stabilization, still really heavy, holding the trend but still really heavy. A rebound off the 50, this is a positive thing. This reinforces the idea that this stock is still in demand. So this was a short-term thing, where the stock popped on earnings and traders took profits, I know I took some. Then the way the stock traded I thought, crap, I wish I had taken it all but that’s not how you trade.

The idea is this is a gap and crap. The stock sells off, I have got to get out of this stock. Well, it turns out over the next three days the stock is proving you wrong, actually there is still plenty of demand here so we just need to wait a bit for things to clear the way, for more supply to get out of here. The stock continues to trade sideways.

If you are long this stock you are liking this. We want to see this box between the high here, basically the empty stuff here, we want to see this extend for a long time. Because what that is showing us is, the stock continues to gather along the 50-day moving average soaking up the weak hands who wish they had sold, then they kind of gradually do. Then at some time at some point all the selling pressure is done and then you are going to get a lift off here. So this is actually really good price action here.

And then here we are last Thursday and the stock still continues to move. Crap, I am wrong on this trade, I have got to get out. Maybe you did get out. Maybe you got stopped out. But guess what? Boom! We are right back where we started from. So this move here, as weird as it sounds, this is a bad deal. That’s a bad sign for a stock, especially after this. But then the very next day a reversal on greater than average volume, that’s a real key signal, it is an important signal. And then now we are back up how far? We are within 5 percent, less than 5 percent below the all-time high.

So this kind of price action, over the last few weeks, has actually turned out to be really bullish. I think you want to own this stock. You have got to kind of set a loose stop on this, 10 percent or so, so you take a small position. But this is a stock that you can be buying even right now. Prefer to buy it closer to 130.00 but I really think 135.00, 145.00 will do as well.

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