The software application sector had a tough Q3. Since rising 47% from January 1st-August 1st, software stocks have plunged. The catalyst that “tipped over” these tech stocks was the Fed’s rate cut in early August when the rest of the market cratered.
But unlike other equities, software stocks didn’t enjoy a recovery in the first weeks of September. Instead, they just fell further.
Now, however, over the last two weeks, that’s all changed. The sector as a whole is finally starting to mount a comeback, and a few companies, in particular, are on the verge of rallying.
Take Twilio Inc. (NYSE: TWLO), for example, a stock that’s had a fantastic 2019. At least, until the August doldrums hit.
But before that, Twilio was up over 72% for the year at its 2019 high. Software bulls who took a chance on TWLO were hooting and hollering during the company’s meteoric rise.
And to be honest, they probably still are. Even after the post-August sell-off, TWLO sits at a 28% gain over 2018’s close.
Things could get a whole lot better for bulls, though, based on TWLO’s latest move that brought the stock back into “rally range.” Bigger gains are likely on the horizon for investors that didn’t give up on the high-flying software company, along with short-term traders that are looking for an “in” on one of the market’s top performers.
In the weekly candlestick chart above, you can see TWLO’s consistent uptrend that’s lasted most of the year, as well as where everything fell apart. Over the last month, however, TWLO shares have begun bending back upwards after hitting the lower Bollinger Band (BB).
Stochastics indicate that TWLO is oversold as well, which shouldn’t come as a surprise as the stock has “ridden” the lower BB for weeks now.
The current weekly candlestick is trading above the last three candle bodies, suggesting that there’s significant positive momentum at play. If TWLO moves above the closest point of resistance (the high from three weeks ago) by a percentage point or two (at around $118.50), it might make sense to go long.
The higher low – which is in the process of being set now – could serve as an excellent “launchpad” for the next rally.
Provided that China and the U.S. can play nice, of course. If hostilities re-emerge, TWLO will likely drop with the general market.
But if the going is good, at least for a couple of months, we could have yet another all-star trade on our hands.
