Shopify (SHOP) is an Ecommerce company headquartered in Ottawa, Ontario. They operate the high profile Shopify.com platform which provides businesses with online stores and point of sale systems.
More importantly, from a technical perspective, SHOP has retraced to the 1050 to 1100 range low area. When price tests such a level, there is a greater chance of buying activity. As you can see, premarket, the price is higher by about 40 points.
What made this stock a compelling choice was the fact that is closed strong while the broader market sold off significantly. This is a clear sign of relative strength, and when the market retraces higher (like it is at the moment) these relatively strong stocks are likely to outperform.
This idea is for a swing trade which means we are looking for a retrace back into the middle or slightly higher than the middle of the broader consolidation. That means it is proportionally reasonable to anticipate a test of the 1250 to 1325 area over the next couple of weeks.
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Here’s the swing trade idea:
Buy LIMIT: 1160
Stop Loss: 1060
Target 1: 1230
Target 2: 1260
Target 3: 1300
NOTE: We are using a BUY LIMIT order for this idea because the stock has gapped significantly before the market open. The objective is to capitalize on intraday price noise and get filled at a more attractive price.
One of the risks associated with this type of order: may be filled during a wave of bearish momentum which can lead to a stop out quickly. We usually do not use these type of orders for an entry, but in this case making an exception to compensate for the unusual situation.
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