My daughter started Zoloft about 2 weeks ago. We have recently notice bumps on her torso, legs and arms that are painful and itch.
Could this be an allergic reaction?

It could be a "drug rash." Her doctor should easily be able to diagnose this. If it is, he/she will take her off the Zoloft and not re-medicate her with anything for a few weeks.

HOWEVER, keep an extremely close eye on her, since you suspect that this is a reaction to the medicine it is best to quit giving it to her until she has seen the doctor. A drug reaction can rapidly escalate into anaphylactic shock, which can kill very quickly, especially in children.