Yesterday, we looked at a Daily Price Chart with moving averages of Microsoft Corporation., noting the stock has been on a bullish run since February 2019.
Today’s Chart of the Day is a Keltner Channel Chart for Twilio Inc. (NYSE: TWLO).
Twilio Inc., together with its subsidiaries, provides a cloud communications platform that enables developers to build, scale, and operate communications within software applications in the United States and internationally. Its customer engagement platform provides a set of application programming interfaces that handle the higher level communication logic needed for nearly every type of customer engagement.
Now, the Keltner Channels serve as an overbought/oversold indicator. When the daily stock price is trading above the Upper Channel, it signals that the stock is overbought.
Stocks in a price uptrend do not advance in a straight line. There are always price retracements along the way. When a stock becomes overbought, it normally declines in price as the inevitable profit taking occurs.
Below is a Keltner Channel Chart for Twilio Inc. along with the three Keltner Channels (Upper, Middle, and Lower).
The TWLO daily price chart shows that TWLO is in a strong price uptrend and recently became overbought a few times as the stock traded above the Upper Keltner Channel (circled in blue).
As you can see, after trading above the Upper Channel in all scenarios, TWLO experienced a pullback.
Yet, even though TWLO experienced the pullbacks, in all cases the stock always continued to rally afterwards.
If you want to participate in this rally, where is the best place to enter?
We use the Keltner Channels to help us select a lower-risk entry point.
A Keltner Channel “Buy Zone” occurs when a stock is trading below the Upper Keltner Channel. Once the daily price is trading below the Upper Channel, it signals a buying opportunity.
If you had purchased TWLO shares when TWLO entered the “Buy Zone” around February 6th, you’d be up 59.9% on the stock by now.
Knowing that TWLO shares are continuing to rise, experience pullbacks, and rally again, we’ll be paying attention to future pullbacks in order to get in at the lowest entry point.
Editor, Chart Of The Day