Twilio Inc. (TWLO) shares rose nearly 7% on Friday after breaking out from prior reaction highs at around $33.00. In mid-February, the company announced better-than-expected fourth quarter financial results that sparked the current rally. Bank of America Merrill Lynch analysts initiated coverage on Twilio stock with a Buy rating and a $45.00 price target on March 1 following the positive financial results and outlook.
However, Friday's breakout came despite "material weaknesses" disclosed in Twilio's internal controls and networking issues at Amazon.com, Inc.'s (AMZN) Web Services division. Twilio disclosed "material weakness" in some of its internal controls but concluded that the consolidated financial statements were still fairly presented. Amazon networking issues may have also affected Twilio's service on Friday before being resolved. (See also: Twilio Stock Breaks Down on Amazon News.)
From a technical standpoint, the stock broke out from reaction highs at around $33.00 toward R1 resistance at $38.66. The relative strength index (RSI) remains overbought at 81.87, but the moving average convergence divergence (MACD) remains in a bullish uptrend. These indicators suggest that the stock could see a near-term period of consolidation, but the significant uptrend that began in early February remains intact.
Traders should watch for consolidation between reaction highs at $33.00 and R1 resistance at $38.66. If the stock breaks out from R1 resistance at $38.66, traders should watch for a move to R2 resistance at $43.15. If the stock breaks down from trendline support, traders should watch for a move to the pivot point at $30.95 or the 50- and 200-day moving averages that are converging at around $28.00. (For more, see: JPMorgan Lists Favorite AI Picks.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.