Shopify Inc. provides a cloud-based and multi-channel commerce platform for small and medium-sized businesses. Its platform provides merchants with a single view of their business and customers in various sales channels, including Web and mobile storefronts, social media storefronts, mobile apps, and physical retail locations; and enables them to manage products and inventory, process orders and payments, ship orders, build customer relationships, and leverage analytics and reporting.
Take a look at the 1-year chart of Shopify (NYSE: SHOP) below with my added notations:
SHOP trended consistently higher throughout 2016. Recently, the stock has created a 52-week high resistance level at $45 (red), while also climbing a short-term trendline of support (green). At some point, SHOP is going to have to break one of those two levels.
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The Tale of the Tape: SHOP trades between a trendline support and a $45 resistance. A long trade could be made on a pullback down to the trendline, or on a break through $45, with a stop placed below the level of entry. A break below the trendline could be an opportunity to get short the stock.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT