High-flying cloud stock Twilio could have more room to run, trader bets

One of the best-performing cloud stocks could have more room to run, according to Todd Gordon, founder of TradingAnalysis.com.

Twilio, a $43 billion cloud company, has seen its shares rise 203% so far this year. The SKYY cloud computing ETF, by comparison, is up 35%.

"The stock has been ripping on the upside. It's one that I've followed for a long time. I hold it in my portfolio. It had a pretty good pullback here but we've accelerated here in 2020, amazingly," Gordon told CNBC's "Trading Nation" on Tuesday.

Gordon's bullishness was rewarded after the company's investor day last week – Twilio offered solid guidance for the next few years, inspiring a string of price target increases from analysts. However, Microsoft recently announced new communication services that could be a challenger to Twilio.

"From a technical point of view, we're trying to break through this triple top up at about $292," Gordon said. "I have a pretty healthy position in it now so I'm not really looking to add the stock, but if you don't have a position and you're looking to do so, this could be a nice trigger to get through this triple top up around $292."

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To take advantage of an expected move higher, Gordon is buying the 300 strike call with Nov. 6 expiration and selling the 315 strike call.

"That's a $15 spread for which we'll pay $5.08 or $508 per spread," Gordon said Tuesday afternoon.

This call spread covers its earnings, scheduled for Oct. 26. A move as high as $315 implies 6% upside.

Disclosure: Gordon holds Twilio. 

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