For his Executive Decision segment of "Mad Money" Wednesday, Jim Cramer spoke with Jeff Lawson, CEO of Twilio (TWLO) , the cloud services provider that recently surpassed a $1 billion run rate yet has seen its shares plunge 18% over the past month.
Lawson said throughout its history Twilio has been focused on two things, customers and growth. That was true when the company hit a $1 million run rate and a $100 million run rate and it's still true as it crosses $1 billion, he said. Twilio is riding the trend of companies building great digital experiences for their customers, and that trend will be around for a long time to come, Lawson said.
One of Twilio's recent offerings is Conversations, which allows customers to text message a company directly to ask questions. Lawson said two-way communications are vital to developing relationships and loyalty, and it's what hundreds of companies are now using as their direct line to customers. Companies such as Nordstrom Inc. (JWN) uses the service to connect customers to sales associates, while Tesla Inc. (TSLA) connects owners with their service managers.
Twilio currently has more than 161,000 customers and is adding more thanks to innovations such as TwilioQuest, a video game that teaches developers the ins and outs of developing on the Twilio platform.
Enough about the fundamental story. Let's check out the charts and indicators and see if the decline is near an end in Twilio, which is a holding of Cramer's Action Alerts PLUS charitable trust.
In this daily bar chart of TWLO, below, we can see that prices topped out in June/July and turned lower in August. The On-Balance-Volume (OBV) line peaked at the end of July and its eight-week decline tells us that sellers of TWLO have been more aggressive. A switch from the aggressive buying is seen from October. Prices are trading below the declining 50-day moving average line and below the cresting 200-day line. In the next few days or weeks we are likely to see the 50-day line move below the 200-day line for what is commonly called a death cross. This sell signal is typically late but can be effective in long-trending markets.
The Moving Average Convergence Divergence (MACD) oscillator in the lower panel is well below the zero line and may or may not give us a cover shorts buy signal in the days ahead. It all depends on the price action.
In this weekly bar chart of TWLO, below, we can see part of the life cycle of a stock. You can see the base formation from late 2016 into the beginning of 2018. You could have accumulated (bought) a long position around $30 or better and got to see the stock rise five-fold to around $150. Trading volume increases on the rally and then declines this year as prices peak and turn lower. TWLO's rally is well-defined by the rising 40-week moving average line, which was broken on the downside this month. The weekly OBV line rises in bullish fashion from early 2018 but stalls out in July and August of this year. The MACD oscillator on this long time frame turns to a take profits sell signal in April/May. The oscillator is close to crossing the zero line now and a potential sell signal.
In this Point and Figure chart of TWLO, below, we ignore time and volume and just focus on price swings of a given percentage. The pattern of trading is typical of distribution (selling) with more down columns ("O's) than up column's ("X's"). A tentative downside price target of $94.30 is indicated.
Bottom line strategy: With most of our favorite indicators and moving averages aligned to the downside and a lower Point and Figure target, I would look for TWLO to work lower into October. If support develops in the low $90s we might want to look at the long side again.