Two great companies with strong growth…and stocks that should be sold. Here are my thoughts on Twilio (TWLO) and Acacia Communications (ACIA). (October 10, 2016)
TWLO ACIA TWLO ACIA
I want to look at Twilio ( NYSE:TWLO ) and Acacia ( NASDAQ:ACIA ) for the same reason, really. These are stocks that you DON’T want to be owning now. The companies are great. The fundamentals are off the charts. But the charts are now showing that it is past time to go. First of all, with Twilio ( NYSE:TWLO ). The news comes out today, they are selling 50 million dollars worth of stock. Not 50 million shares, 50 million dollars. The share holders are also going to be selling, though I couldn’t find out how many shares. Now, there is only 11 million, almost 12 million shares in the float so this is not a huge sale. This is cocktail napkin stuff, if you just calculate 50 million dollars worth of stock at $50.00 or something, it is less than a million shares. But the point is, it doesn’t really matter what the news was, the point is the stock fell to the 50-day moving average and then it continued lower. Now this needs to do a lot of rebuilding, so it is not one that you want to be holding right now.
Now one thing, and this is kind of a do as I say not as I did. I was on vacation last week, and when I go on vacation I always protect all of my positions in a trading account with stops. Maybe I will sell options or something like that, but for the most part I just think that ‘simplest’ is better and so I will put in trailing stops. And here on Twilio ( NYSE:TWLO ), because I had a decent size position that I have had for a while here, I put in a trailing stop somewhere up here, wherever it was, around 60ish, something like that. And then I went on vacation happily drinking Mai Tai’s and this and that and the other thing. Then I came back, this morning I looked at it and I see I am still long my Twilio ( NYSE:TWLO ) shares. Well what the heck happened to my stop? It was a DAY order stop. It expires at the end of the day. I thought it was a ‘good till canceled’. My bad, stupid me. So I lost money on these shares when I should have actually been making money.
Now what is the moral of the story? Is it like, Oh my gosh! Always make sure you put in ‘good till canceled’ orders? Sure. But that is easy. The reason I am going into this is, it would have been easy, well not for me, for me it wouldn’t have been easy, but for a lot of people you see this stock down like this, you see it down, the 50-day moving average is down 8 percent. “Oh, but it is beating the 50-day moving average. I am going to wait until the stock bounces back up and then I will sell.” Well you don’t get to dictate whether the stock bounces or not. I saw the stock doing this and one of the things I thought about was, “Oh well wait, I will see if the stock bounces and then I will sell.” And immediately I thought, “I don’t get to dictate that.” So what did I do? When the stock was up here I put in a, not a trailing stop, I put in a very, very tight stop right below the 50-day moving average, because this is just knocking at the door, right there. So I thought, “Okay, I will risk about 20 or 30 cents, whatever it is, put in a trailing stop,” and then I went about my day.
Too bad, so sad. I was a little upset, but not that upset because I don’t take big positions over vacation. So it was kind of a bummer; then I got another cup of coffee and moved on. Then 10-15 minutes later, Boom! My stop was hit. So what did that save me? Well, it saved me another 6 percent decline on the stock. The stock is down 14 percent today. So I feel like this was actually kind of a victory. I was able to wait for a bounce, but NOT give it any more room. I didn’t give it any more room, got stopped out and that is that. Live to trade another day. That is really the thing; you live to trade another day. So I will ask you, are you still long this stock? I have been talking about this since the squeeze. A really nice move up until now. So are you still long this stock? And if so, why? Seriously, there is no reason, there is no good reason to be long this stock. And being long to stock because you bought it higher and now just need to get your money back, that is not a good reason. It is a reason, but it is not a good one.
Similarly with Acacia ( NASDAQ:ACIA ); they filed to sell 450 million dollars worth of stock at $100.00 a share. Well, this tells you all you need to know; the stock is down at 92.50, so this isn’t working. It is down 7.5 percent from this secondary price, and it is on volume. So you DON’T want to be long Acacia ( NASDAQ:ACIA ) right now. You DON’T want to be long Twilio ( NYSE:TWLO ) right now. I would have told you the week before last that you wanted to be long both of these stocks. When the price action changes the opinion has to change as well. So I am out of these stocks. I would highly suggest that you be out of these stock. Don’t be a fan. DO NOT be a fan If you want to be a fan root for the New England Patriots.
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