Twilio Stock Flashes Reliable Short-Term Buy Signal

Now seems to be an attractive time to buy near-term options on Twilio stock

Managing Editor
Oct 9, 2018 at 2:26 PM
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Cloud concern Twilio Inc (NYSE:TWLO) is down slightly in afternoon trading, with the shares last seen at $74.03. The stock has been pulling back since last month's record high, and is now nearing a key trendline that's marked attractive entry points for a bullish short-term trade in the past.

Looking closer at the charts, TWLO nearly quadrupled from its early February low of $23.25 to its Sept. 28 record peak at $88.88. However, the security has shed almost 14% so far this month, and is now trading within one standard deviation of its 80-day moving average.

Daily Chart of TWLO with 80MA

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been four other times Twilio has pulled back to this trendline after a lengthy stretch above it. After these signals, TWLO stock averaged a five-day return of 9.53%, with 100% of those returns positive. Going out one month, the shares averaged a gain of 7.5%, with half of the returns positive.

Amid its long-term outperformance, analysts are bullish toward the software stock. Specifically, all 15 firms following TWLO sport "buy" or "strong buy" recommendations, while the equity's average 12-month price target of $85.73 is a 15% premium to current levels.

Plus, now seems to be an attractive time for near-term traders to trade Twilio stock with options. This is based on the security's Schaeffer's Volatility Index (SVI) of 57%, which sits in the low 28th annual percentile, indicating muted volatility expectations are being priced into short-term contracts.

What's more, the security's Schaeffer's Volatility Scorecard (SVS) stands at 87 out of a possible 100. This shows the software stock has tended to make larger-than-expected moves on the chart over the past year, relative to what the options market has priced in.

 

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