I am starting to eye Twilio Inc (NYSE:TWLO). The entry price for me is extremely clear. It is partly based on technical analysis as well as the fundamental knowledge of a lockup that expires on December 20th, 2016. Most investors got caught in the hype of this company when it ran to $70.00. Not me. Instead, using logic and technical analysis an investor can be ready to pounce and profit. Let's go over the sound reasoning that will get me to buy at $27.50 and below.
1. The reason that the stock has been under so much pressure is because investors are selling ahead of the lockup expiration. This is something that most investors believe will cause a drop after the expiration, but in reality, it is the fear ahead of it that causes the selling. There are plenty of cases in recent history where a stock sold off ahead of the expiration but bottomed on the expiration or just a few days before. I expect this fully with Twilio Inc. There are only 10 million shares that will be freed when the lockup expires. At a price of sub $30, how many investors are really going to sell? Not many when the stock was as high as $70. Instead, they will wait for the stock to surge back up.
2. There is a gap fill on the stock chart which represents major support. I will accumulate at the gap fill of $27.50 down to $24 which is the all-time low. Both of these are huge technical support levels and will see institutional accumulation.
3. The expiration is December 20th, 2016. There may be minor pressure on the stock through year end on tax loss selling. However, the January Effect will take place at the start of 2017. This is where there are no more sellers because they already dumped in late December for tax reasons. Buyers swoop in and will shoot this stock sharply higher. The January Effect is something most smart pro investors understand and utilize to profit in a major way.