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.
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Twilio  (TWLO) - Get 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 Report and Livongo Health  (LVGO) - Get Report, the latter of which just agreed to a merger with Teladoc Health  (TDOC) - Get 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.

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.