The Allure of Playing Hard to Get

With Facebook's stock performing an abrupt about-face from Friday's strength and leading the Nasdaq (and market) lower this morning, it is likely correct to treat lightly on the long side in front of new Fed Chair Powell's first FOMC later this week. Indeed, the major averages are sporting the look and feel of an ongoing consolidation and choppy range. 

That said, it is also likely correct to resist the major bear case until we see more actual evidence of major technical detonation across equites as an asset class. And while it is true that some sectors like energy have been disappointing, there remain quite a few impressive standouts in tech and even retail. 

Regarding emerging new leaders in tech, Twilio has been on a tear since reporting its strongest earnings quarter yet in February. Beyond being a sexy acquisition target for larger enterprise software/cloud plays like CRM MSFT NOW WDAY, just to name a few, Twilio has many of the hallmarks of a new growth winner. 

After an abrupt post-IPO collapse in late-2016, TWLO spent well over a year wearing out leftover bulls until it finally woke up in February. 

On the daily chart, below, note how TWLO has been playing "hard to get" in recent weeks, meaning that eager prospective longs have not been given much of a chance to enter at a reasonable spot in terms of lower risk/reward spots.

This is a common theme with new, early-stage growth winner. And while that "hard to get" phenomenon may be frustrating, it is worth gleaning the valuable information that TWLO clearly has strong underlying demand from fund managers to accumulate the name with its gap-and-never-look-back move after earnings. 

Going forward, if the broad market does consolidate or even correct some more I would view the likes of TWLO as a prime example of the type of name we want to stalk into pullback for lower risk long entires. 

As long as TWLO now holds above $35 into pullbacks it is hard not to embrace the idea that it has turned the corner in a major way.