Buyers Should Let Shopify Stock Breathe Before Investing

Shopify (NYSE:SHOP) stock’s bid for world dominance continued in earnest this week with SHOP rocketing to a new record. The Canadian e-commerce company is one of the hottest stocks on Wall Street. And that’s saying something given the massive winners created during the latest stage of our beefy bull market.

Avoid Buyer’s Remorse by Avoiding Shopify Stocks for the Near Term
Source: Paul McKinnon /

To celebrate SHOP stock’s flirtation with fresh highs, let’s take a look at its price chart to identify the trends and price levels that should command our attention moving forward.

As with any effective top-down approach, we’ll begin with the bigger picture seen through the weekly chart, then move into smaller time frames for further clarity.

The Weekly Chart for Shopify Stock

The weekly time frame chronicles Shopify’s meteoric ascent since 2016, revealing just how far the tech stock has come. From humble sub-$20 beginnings, SHOP has gone on to gain some 2,288% in four years.

Of course, letting such a monster winner ride would have taken incredible patience. The pull to ring the register along the way had to be immensely powerful, particularly when corrections cropped up. Just last year, Shopify saw a 31% peak-to-trough drawdown.

Source: The thinkorswim® platform from TD Ameritrade

Buyers were quick to return once the bears were finally cornered and shot. SHOP has risen nine of the last 10 weeks, reflecting a huge comeback in optimism. The uptrend boasts rising moving averages across the board. Volume patterns show multiple accumulation weeks during the fourth quarter, and we’ve yet to see a whiff of distribution.

The one legitimate gripe naysayers have here is the overbought condition. This is far from a low-risk entry, and requires a willingness to play a continuation in momentum even though we’re well away from an established support zone.

The Daily Chart

Drilling down to the daily numbers reveals a trend that echos the weeklies. Moving averages are rising to confirm buyers’ dominance across time frames. The volume panel reflects consistent accumulation over the past six weeks. But with the stock up six of the past seven days, it’s hard to justify deploying new bull trades.

Source: The thinkorswim® platform from TD Ameritrade

Virtually every single time Shopify stock pushed into overbought territory last year, it paused or pulled back to create a lower-risk entry. I see no reason why that won’t be the case this go around. Why bank on this being the one time that demand defies gravity by turning a seven-bar advance into one 10 bars or longer?

No thanks.

It’s worth waiting for a better entry, even if it means missing out on further upside in the short run. The next two support zones are $410 and $395. That’s where you’ll want to watch for buyers to emerge and a better setup to form.

Alternatively, SHOP could consolidate up here to work through the overbought pressures over time. In that scenario, mark the high of the range and use it as your trigger for breakouts. The next earnings announcement is slated for Feb. 11, so you have approximately three weeks to play until mass uncertainty strikes.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here!

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