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Trade Details: Bought to open 4 Dec 2nd Twilio Ord Shs Class A (NYSE:TWLO) 37.5 calls for $1.80, $727.11 total cost (42.7% of account), 11 days to go. The trade executed at 11:12:24 when the stock was approximately $37.50.
Potential: Unlimited, but I'll be watching the 30-minute to 2-hour technicals (underpinned by the bullish daily chart) as the stock sits at an important inflection point - Develops positively: trade the divergence on the 2-hour MACD. Develops negatively: cut losses when the option price is marked at $1.35.
Thesis: This entry builds on my Nov 15th TWLO trade. I am looking for a secondary upside move in TWLO shares.
In the chart array below: 1) The daily remains constructive with MACD divergence, the last two days featured an inverted hammer preceded by a hammer candle and the 9 and 21-day moving averages are ready to cross 2) The 2-hour MACD line bounced off the signal line yesterday and appears ready to do it again based on the improvement in the 30-minute technicals.
It's important that the faster technicals hold, along with the rising trendline. A secondary trendline indicates support around $36.20, a target/entry that might be eyed by a more conservative trader.
Conflicting options activity, weighted toward the bullish case, occurred yesterday and last week. Larger trade: Dec 40 puts sold for $6.00+ and Dec 40 calls bought around $1.50 for a net credit. Another trader bought the Dec 40 puts and sold the Dec 35 puts, a long put spread.
Note: I may have entered this trade too soon, using a shift to convergence on the 30-minute MACD as the trigger rather than a confirmed MACD/signal line cross. But, with wide option spreads and a bevy of bullish data points including broad market strength and outperformance in the tech sector, I decided to get ahead of the (potential) rush and set a stop loss versus chase option prices higher.