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Twilio Stock Quadrupled, Then Dipped - Here's the Trade

Twilio stock had more than quadrupled ahead of its earnings report, then dipped. Here's how to trade TWLO stock now.

Twilio  (TWLO) - Get Twilio, Inc. Class A Report shares are down on Wednesday despite a better-than-expected earnings report.

To be fair, the shares are now down just 2%, after they more than 5% in morning trading.

Twilio stock has been robust: The shares quadrupled from the March lows ahead of Tuesday evening’s results. The company delivered a top- and bottom-line earnings beat and above-consensus revenue guidance.

When it comes to high-octane growth names, that’s exactly what management needs to do in order for the stock price to continue higher. 

We’ve seen it in others too, like Fastly  (FSLY) - Get Fastly, Inc. Class A Report and Livongo Health  (LVGO) - Get Livongo Health, Inc. Report, the latter of which just agreed to a merger with Teladoc Health  (TDOC) - Get Teladoc Health, Inc. Report.

The run here has been intense, but the technicals haven’t wavered much. In June the shares had about tripled from the lows. Yet a breakout over ~$205 was staring the bulls right in the face.

Let’s see what the charts are telling us now.

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Trading Twilio Stock

Daily chart of Twilio stock.

Daily chart of Twilio stock.

The charts look much different now, as the shares have more than quadrupled in just a few months. While the report was strong and better than anticipated, it was not the blow-your-socks-off report we saw in May.

That’s why, despite the beat, the shares are stagnating on the day. But they're not exactly breaking down, either.

Twilio shares are getting a bounce off the 10-day moving average, as buyers contemplate whether the report is enough to bid them back up through the 261.8% extension and to all-time highs.

If it is, $300 and the three-times range extension near $315 are in play. If not, Twilio stock may pay a visit to the 20-day moving average and uptrend support. Provided this holds as support, this seems like a possible buying opportunity near this zone.

Larger declines could land Twilio near the 50-day moving average and two-times range, followed by the breakout level near $210 we flagged in June.

In any event, recent bulls or longer-term investors may consider a close below the 10-day moving average — which was support today — as an opportunity to trim some of their long exposure. This has been a monster winner and there’s no reason to let those gains go to waste.