Has Twilio Inc's (TWLO) Fire Run Out of Fuel?

It looks like Twilio Inc (NYSE:TWLO) may have already peaked

by Kirra Fedyszyn

Published on Sep 1, 2016 at 3:17 PM

Since cloud-based communications stock Twilio Inc (NYSE:TWLO) began trading publicly in late June, the shares have added an incredible 266% relative to the IPO price of $15, last spotted at $54.87. In fact, if the stock can merely stay in place over the next few weeks, it would tag the best three-month return of any major IPO in recent years by a mile -- though that's not always an indicator of future success. As it happens, TWLO seems to be running into technical trouble already.

The shares topped out at a high of $66.40 in mid-August, and have since been pulling back. Hitting a set of lower highs and lows, it looks like TWLO may be forming a descending triangle pattern. For now, the stock is holding above support at the round $50 level, which forms the bottom of this triangle, but should the shares drop below the half-century mark, a larger sell-off could be ahead.

TWLO Daily Chart Sep 1

Speaking of key technical levels, TWLO spent several weeks stuck beneath resistance at $45 in July. Finally breaking out above that speed bump in mid-August, the shares next found a roadblock around the round $60 level, which the stock still has yet to top on a closing basis. Potentially adding to the strength of resistance in this area is heavy call open interest at the September 60 and 65 strikes. An unwinding of the hedges related to these positions as front-month options expiration approaches could serve to pressure the stock lower.

While TWLO's life as a publicly traded company -- and an optionable stock -- has been short, speculators have taken a distinctly call-skewed approach so far. Over the past 10 days on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity has a seen 3.17 calls bought to open for every put.

Outside of the options pits, meanwhile, the sentiment picture is not so rosy. Short interest on TWLO has begun to climb, rising 5.4% during the most recent two-week reporting period, to account for more than 6% of the stock's total float. Analysts don't appear to be entirely on board, either. Of the five brokerage firms providing coverage, four give Twilio Inc (NYSE:TWLO) a lukewarm "hold" rating. Plus, the average 12-month price target sits at just $39 -- a significant discount to current levels.

Let us help you profit from market volatility. Target big gains in short order with a 30-day trial of Schaeffer's Weekly Volatility Trader!

A Schaeffer's exclusive

6 Sectors for Summer

Access your FREE insider report before it's too late!


  
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


Huge New Legal Marijuana Market Has Shortage Crisis
250 million Europeans have access to medical marijuana. There's already a shortage....
J M Smucker Stock Jammed by Ugly Sales Outlook
J M Smucker's fourth-quarter profits and revenue were better than Wall Street expected
NIO Rises on Record-Breaking Deliveries
Nio stock hit a record high in vehicle deliveries for May
The Next Big Player in U.S. MJ Boom
Most pure-play marijuana stocks in the U.S. trade on the Over-the-Counter stock exchange.