‘Sell Zone’ Alert for TWLO

Dear Reader,

Yesterday, we looked at a Daily Price Chart of United Rentals, Inc., noting the stock’s 24/52 Day MACD line is above the 18-Day EMA signaling a bullish stock.

For today’s Trade of the Day we will be looking at a Keltner Channel chart for Twilio Inc. stock symbol: TWLO.

Before breaking down TWLO’s daily Keltner Channel chart let’s first review which products and services are offered by the company.

Twilio Inc., together with its subsidiaries, provides a cloud communications platform that enables developers to build, scale, and operate customer engagement 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, as well as enable developers to embed voice, messaging, video, and email capabilities into their applications.

Now, let’s begin to break down the Keltner Channel chart for TWLO. Below is a Daily Price Chart and the three Keltner Channels for TWLO stock.

Sell TWLO Stock

The Hughes Optioneering Team uses the Keltner Channels as an indicator to determine whether a stock is overbought or oversold. If a stock’s daily stock price is trading below the lower Keltner Channel, this signals that the stock is temporarily oversold and subject to a rebound.

Even stocks that are in the strongest bearish trends do not decline in a straight line. There are always price rebounds along the way. When a stock becomes oversold, it’s price will typically rebound soon after as the inevitable buying the dip occurs.

The TWLO daily price chart shows that the stock is in a strong price decline and has become oversold several times. You can see this as TWLO has traded below the Lower Keltner Channel on multiple occasions recently.

But, in every scenario when TWLO became oversold, the stock soon experienced a price rebound.

Finding opportunities when a stock experiences a price rebound is why the Hughes Optioneering Team uses the Keltner Channels. They help us find a lower-risk entry point for our bearish trades.

The Keltner Channel “Sell Zone” occurs when a stock is trading above the lower Keltner Channel. Once the daily price is trading above the lower channel, it provides a lower-risk buying opportunity for bearish trades as the stock is likely to decline further.

Our initial price target for TWLO stock is 45.50 per share.

83.0% Profit Potential for TWLO Option

Now, since TWLO stock is currently trading in the Keltner Channel ‘Sell Zone’ this provides a prime bearish trade entry point. Let’s use the Hughes Optioneering calculator to look at the potential returns for a TWLO put option purchase.

The Put Option Calculator will calculate the profit/loss potential for a put option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat TWLO price to a 12.5% decrease.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following TWLO option example, we used the 1% Rule to select the TWLO option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select a TWLO in-the-money option strike price, TWLO stock only has to decrease 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money put option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if TWLO stock is flat at 48.05 at option expiration, it will only result in a 7.1% loss for the TWLO option compared to a 100% loss for an at-the-money or out-of-the-money put option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money put options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

The prices and returns represented below were calculated based on the current stock and option pricing for TWLO on 12/15/2022 before commissions.

When you purchase a put option, there is virtually no limit on the profit potential of the put if the underlying stock continues to decline in price.

For this specific put option, the calculator analysis below reveals if TWLO stock decreases 5.0% at option expiration to 45.65 (circled), the put option would make 37.9% before commission.

If TWLO stock decreases 10.0% at option expiration to 43.25 (circled), the put option would make 83.0% before commission and would greatly outperform the stock return*.

The leverage provided by put options allows you to maximize potential returns on bearish stocks.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

Average Portfolio Return of 255.8%

Below is a screenshot of the current open trade profit opportunities from Chuck’s Inner Circle Trading Service. There are currently $170,691.66 in open trade profit opportunities with an average portfolio return of 255.8% demonstrating the ability of the Optioneering Strategy to deliver substantial returns with no losing portfolios**.

**Open trade profit results represent the open trade profit performance for the portfolio displayed on 12/15/22. Open trade profits may have increased or decreased when trades were closed out. Trading incurs risk and some people lose money trading. Past performance does not necessarily predict future results. Member profits and losses are not tracked. Profit potential is taken from results of signaled trades, not actual member results. Not all members make the trades.

Get Trade Insights Directly From Chuck

You can start getting market insights directly from 10-Time Trading Champion Chuck Hughes.

See what he’s trading and when with his exclusive Inner Circle Trading Service where he will send you his hand-picked stock and option trades.

Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join or CLICK HERE to schedule a call!

Wishing You the Best in Investing Success,