Following a massive first-quarter buying spree and aggressive shopping to kick-off the second quarter on Wall Street, Shopify (NYSE:SHOP) stock is one to own in today’s “risk-on” environment.
On the heels of last quarter’s 18% gain in the Nasdaq Composite and its best performance in ten years, the message was loud and clear in the first trading session of Q2. And that message is investors aren’t finished shopping in the equity markets. As much, today’s confidence in riskier assets bodes well for Shopify stock whose one-stop shop for e-commerce solutions continues to grow like crazy.
Still, don’t expect every day to be filled with rainbows and unicorns in SHOP shares.
Case in point, in Monday’s session, the broad market gauge finished up a hefty 1.15%. Headlines of stronger-than-forecast manufacturing PMI data out of China easing global growth concerns drove the bid. Yet when all was said and done, Wall Street’s enthusiasm failed to stick in SHOP stock, which finished off 0.28%.
Again though, don’t be fooled into thinking Shopify is done going up. As one day doesn’t make a trend, Shopify’s weak price action on Monday isn’t something to get alarmed about. In fact, traders should be bullish.
Shopify Stock Daily Chart
Unlike the Nasdaq, which is still trying to put the last little bit of 2018’s correction behind it, Shopify stock has been demonstrating its technical wherewithal since February when shares hit new all-time-highs compared to the broader averages, which still remain below their high water mark.
But that isn’t the only thing SHOP stock has going for it.
As the provided daily chart shows, shares of SHOP have also trumped the price performance of the Nasdaq by rallying roughly 17% above the prior highs after breaking out from a strong-looking eight-month long corrective base. And if size matters, as many investors insist, Shopify stock looks a good deal more durable than the broader market and its own shorter “V”-shaped base.
Finally, Shopify stock has had about three weeks to consolidate its gains in a healthy looking flat base. That’s a positive for bulls and combined with an oversold stochastics condition, SHOP has the earmarks of a stock bound for higher prices.
Trading SHOP Stock
For traders agreeable with SHOP stock rallying, I view buying shares at $209.66 as attractive. This entry requires that Monday’s modest case of weak-in-the-knees behavior is replaced with sufficient demand from investors. Specifically, this trigger is 25 cents above the March 15 all-time-high.
This long entry in SHOP also acts as a second-attempt breakout purchase following Monday’s intraday pullback and finish back inside the base. Often enough, it’s the second try following a well-telegraphed, but disappointing initial breakout that goes on to claim big profits for investors.
I’d compliment the second attempt long stock position by placing an initial stop just beneath $198.75. That’s SHOP’s closing low within the price consolidation and should serve to keep investors out of harm’s way, while also smartly keeping exposure to around 5.25% just in case shopping in a risk-on environment turns sour.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.